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To: mishedlo who wrote (27360)4/12/2005 1:48:50 PM
From: Crimson Ghost  Respond to of 116555
 
Illegal Appraisals Inflate Housing Bubble
by Broderick Perkins

Through the din of reports about mortgage fraud, title industry kickbacks, and a general upswing in errant real estate industry activities akin to organized crime, a new report turns the focus to real estate appraisals.

Appraising, the science of determining the value a home, when used to falsely inflate values, sets a dangerous precedent that can not only ruin the household budget, but the nation's economy as well, says "Home Insecurity: How Widespread Appraisal Fraud Puts Homeowners At Risk" recently released by public policy think tank, New York City-based Demos.

The report says too many home owners risk financial ruin because appraisal fraud allows them to borrow more than their home is really worth. Should home values tumble and reflect the homes' true market value, home owners with "upside down" mortgages (mortgage balances larger than a home's true value) who face hardship that forces them to sell their home will have to come up with the difference.

Widespread depreciation in over-inflated home values could have a devastating impact should it affect local, regional, and national economies many of which today are driven, in part, by the booming housing market.

"Appraisal fraud is part of a bigger, more ominous picture," says David Callahan, Home Insecurity author and Director of Research at Demos.

"The inflation of home prices through appraisal fraud may be helping to push a real housing bubble. Some observers believe that appraisal fraud helps explain high foreclosure rates in certain parts of the nation," the report says.

The report says up to half of all appraisers feel pressure from lenders or brokers to overstate property values to close a sale. Appraisers bow to pressures because they fear losing future work. Appraisers who have not bowed to pressure report retaliatory measures including not being paid for work and being blacklisted by lenders and brokers, the report says.

In a RealtyTimes.com story earlier this year, Texas appraiser Bob Burnitt called the industry "the most corrupt 'profession'" and left the industry after repeated firings because he wouldn't fix appraisals.

The Demos report also found:

* Serious conflicts of interest are pervasive in the mortgage industry. Lenders, brokers, and real estate agents often have an incentive to inflate the value of residential properties. Appraisers too often go along with requests to overstate the value of a home out of fear of losing work and being blacklisted. More than half, 55 percent, of all appraisers have reported feeling pressures from lenders or brokers to overstate property values.
* Appraisal fraud is not new, but the refinancing boom has created incentives to boost the practice.
* Appraisal fraud is a predatory lending tactic. Predatory lending includes over priced loan costs -- including boosting home values -- often aimed at minority, older and low-income home buyers.
* Government oversight of the appraisal process is inadequate. With mortgage brokers unregulated in many states, the key participants go unmonitored, making fraud difficult to track and curtail. Oversight of lending institutions is often very weak. State boards that license appraisers and investigate reports of fraud often lack the resources to fully enforce the law.

The report recommends a host of reforms, among them:

* Appraiser independence. Prohibit all contact between appraisers and lenders and brokers. Sanctioning appraisers who go along with requests to inflate property values would level the playing field among honest appraisers.
* Punish wrongdoers. Anyone who pressures appraisers to overstate property values should face stiffer punishment from the federal government. All states should expressly prohibit pressuring appraisers. All states' mortgage brokers should be licensed and accountable to a regulatory authority. This calls for increased enforcement capability so that laws can be enforced effectively.
* Streamline the complaint process. The complaint process should be more uniform and the means for filing complaints made more efficient and effective.
* Educate consumers. Consumers urged to buy homes, treat their equity like a bottomless ATM, and to exchange high-interest credit card debt for low-interest mortgage debt are unwitting accomplices who inadvertently encourage appraisal fraud with demands to quickly seal the deal without paying attention to the appraisal step.

Published: April 12, 2005



To: mishedlo who wrote (27360)4/12/2005 2:14:54 PM
From: Crimson Ghost  Read Replies (1) | Respond to of 116555
 
Japan: The 'Unilateralist' of Asia?

Marshall Auerback

Throughout the 1950s and 1960s, East Asia was the site of some the most costly wars during the era of the Cold War.  But the collapse of the Soviet Union, the region has been a comparative bastion of peace and stability. In recent years, however, that has begun to change as old historic rivalries, whose roots lie in the era of empire and war, have erupted.  The common denominator in virtually all of these disputes has been Japan, which has become involved in increasingly acrimonious conflicts with both Korea and China: these have involved Japan and South Korea over Takeshima/Tokdo Islands, and Japan and China over Taiwan, and the Senkaku/Diaoyutai Islands. 

In many instances, competition for natural resources’/energy security is fuelling the dispute, but more often than not, the growing bitterness appears to spring from the Koizumi administration’s increasingly strident nationalism, which has begun to mirror that of the country’s closest political ally, the US.  In particular, Japan’s remilitarization appears to be introducing a new, destabilizing element in the region.  In the words of Asian scholar, Chalmers Johnson, “Such a development promotes hostility between China and Japan, the two superpowers of East Asia, sabotages possible peaceful solutions in those two problem areas, Taiwan and North Korea, left over from the Chinese and Korean civil wars, and lays the foundation for a possible future Sino-American conflict that the United States would almost surely lose. It is unclear whether the ideologues and war lovers of Washington understand what they are unleashing -- a possible confrontation between the world's fastest growing industrial economy, China, and the world's second most productive, albeit declining, economy, Japan; a confrontation which the United States would have both caused and in which it might well be consumed.”

Ironically, the issues surface at a time when various initiatives are being floated to create a zone of peace and commerce in East Asia that could involve China, Japan, Korea and the ASEAN nations. But these problems surface, too, when Japan's ruling Liberal Democrat Party has dispatched SDF forces to Iraq, has issued new defence guidelines which assert a more offensive role in Asia, and is exploring an expanded Japanese military role within the framework of the U.S.-Japan alliance.  All of this might not matter, but for the fact that the region remains the largest repository of savings in the world. Clearly, it does not bode well for global economic stability if these disputes threaten to get out of hand, as they appear to be doing today. 

Furthermore, it is questionable whether Japan’s embrace of a more strident and offensive form of nationalism/militarism is in the country’s long term interests, given that the country’s debt is a product of its efforts to help prop up America's global imperial stance. For example, in the period since the end of the Cold War, Japan has subsidized America's military bases in Japan to the staggering tune of approximately $70 billion, and has virtually destroyed country’s national balance sheet through its futile dollar support operations, which in turn has perpetuated the most egregious excesses in U.S. economic policy-making and contributes to global financial instability.  Like the US, Japan’s increasingly robust nationalism is the political counterpoint to an economic policy making now running amok.
 
Consider what is occurring in the region today:  In spring 2004, members of an obscure right-wing group in south-western Japan set sail for two islets contested between Japan and Korea in a small Boston whaler covered with the old Imperial Rising Sun flags. Their mission, not the first of its kind, was to reclaim what Japanese call Takeshima (Bamboo Island) and Koreans Tokdo (Lonesome Island) as Japan’s sovereign territory. Upon learning of the craft's departure from a port in Shimane prefecture, the South Korean government promised military retaliation should it approach or invade the islets that Seoul has held since independence in 1945. The Japanese government, preoccupied with the return of the abductees’ children from North Korea and growing protests against Japanese troops in Iraq, quickly acquiesced, and the Japanese Coast Guard guided the boat back to Japanese shores.
 
But this was clearly not the end of the story.  Earlier this year, group of assembly members in Japan's Shimane prefecture submitted a bill calling for a prefectural ordinance to establish "Takeshima Day", an action which spurred public fury in Seoul.  Comments on last month by Takano Toshiyuki, the Japanese ambassador to Seoul, in which he argued that the islands were part of Japanese territory, clearly added fuel to the fire.
 
Japanese-Korean relations have long been afflicted by the former’s brutal colonial occupation of Korea during the first part of the 20th century.  For all of the legitimate upset generated in Japan over North Korea’s abduction of some of its citizens in the 1950s, 60s, and 70s, these atrocities pale in relation to the 700,000 Koreans who were taken and forced to work in Japan in coal-mining regions, munitions factories, dam-construction sites and other places across Japan during the latter’s occupation of the Korean peninsula. The South Korean government has claimed that at least a million of its citizens were mobilized to Japan. In addition to Kawasaki, many Koreans were carted off to places such as Manchuria, northern China, and Sakhalin Island, also in forced-labour industrial projects and coal mining, whilst so-called “comfort women”, girls and women were rounded up in Korea and forced into prostitution to "comfort" Japanese troops.  During the Second World War, an estimated 100,000-200,000 were forced into this sex slavery, and about 80% of them said to have been Korean (others were Filipinas, Chinese and a handful of Westerners).
 
During the 1970s and 1980s, relations had been warmer and more peaceful largely as a result of Japan’s pacifist policies.  This is clearly no longer the case:  Since the end of the Cold War in 1991, the United States has repeatedly pressured Japan to revise article nine of its Constitution (renouncing the use of force except as a matter of self-defence) and embrace a more prominent military “security” role in the region. For example, on August 13, 2004, Secretary of State Colin Powell stated baldly in Tokyo that if Japan ever hoped to become a permanent member of the U.N. Security Council it would first have to get rid of its pacifist Constitution. 
 
Japan has so far not resisted this American pressure since it complements a renewed nationalism among Japanese voters, who fear their loss of influence in the Asia/Pacific region (particularly threatened by the rise of China), and have grown tired of persistently paying compensation in the form of hundreds of millions of dollars in loans and grants to Korea (even though the country, unlike Germany, has never fully acknowledged the extent of its war time atrocities; Japanese education appears to have emphasized Japan's post-war position as a defeated nation, which suffered from crippling attacks including two atomic bombs on Hiroshima and Nagasaki, thus portraying Japan not as an aggressor and victimizer in Asia but as a victim). 
 
North Korea’s nuclear weapons program has also contributed to an incremental remilitarization of Japan:  Military budgets have been expanded and the government has progressively undercut its Pacifist Constitution by legitimizing and legalizing the sending of military forces abroad, as well as announcing a commitment to join the American missile defence ("Star Wars") program.
 
Many Koreans are alarmed by changes in Japan's post-war pacifism, the growing right-wing bias in Japanese politics and the tendency to downplay their historic atrocities, by arguing that “victors write history, not the losers.” On the particular issue of the islands, feelings are inflamed on both sides.  For the Japanese, especially people in Shimane who live closest to the fishing grounds, this dispute is a major fisheries and economic issue not simply a territorial and political dispute. Takeshima is known in Japan as a rich fishing ground that is in effect occupied by South Korea. Japanese fishermen complain that they have been virtually pushed out of the area for many years. Meanwhile, South Koreans strongly believe that Tokdo was the first victim of Japan's colonial invasion of Korean territory and they consider Tokyo's territorial claim an infringement upon their interests and sovereignty. For them, this issue is a microcosm of Japan's brutal colonial occupation and its corresponding lack of historic sensitivity to the issue.
Similarly, China, like South Korea, has always been concerned about Japanese remilitarization, and its increasing projection of military power in areas such as the Taiwan Straits (which it has, like Washington, described as an “area of concern” in its latest defence review).   While Sino-Japanese trade has reached unprecedented levels in recent years, the economic progress could be unravelled by political and military confrontation and by energy competition.  
 
China continues to have tense relations with Japan as a result of a number of issues. These issues include, but are not limited to, Chinese opposition to a Japanese permanent seat on the U.N. Security Council (also opposed now by Korea), former Taiwanese President Lee Teng Hui's visit to Japan at the end of 2004, the overt naming of China as a long term strategic threat to Tokyo, and Japanese Prime Minister Junichiro Koizumi's annual visits to the Yasukuni Shrine that honours war-dead including 14 Class A war criminals.
There has also been discussion in Japan about cutting its overseas development assistance to China in the presence of China's improving standard of living, high growth levels and increasing trade disputes with Japan. Prime Minister Koizumi has added to the rise in tensions by his refusal to pay heed to China’s wartime sensibilities, as well threatening cut-offs in aid to China, arguing that “it’s about time for [China's] graduation [as a recipient of Japanese foreign aid payments]," conveying the insulting implication that Japan saw itself as a teacher guiding China, the student. 

As has been the case in Korea, this underlying deterioration in relations has recently manifested itself in the form of public demonstrations in Beijing against Japan, which clearly had the sanction of the government.  China’s Communist leadership generally enforces a strict code of social stability, and almost never gives permission for protesters to march on the streets of the capital.  Last Saturday, the New York Times reported that several hundred protesters tried to storm the residence of the Japanese ambassador in Beijing, hurling bottles and rocks into the walled compound before riot police officers broke up the confrontation, witnesses said.  Crowds defaced billboards advertising Japanese electronics products, shattered windows at a Beijing branch office of the Bank of Tokyo Mitsubishi, and threw rocks into a Japanese restaurant, but thousands of ordinary police and paramilitary units in full riot gear kept the violence from spreading.

The New China News Agency estimated that 10,000 demonstrators joined a march calling for a boycott of Japanese goods in Beijing's high-tech and university district earlier Saturday, making it one of the largest protest events authorized by the Chinese government in years.
This downward spiral in relations likely to be further exacerbated by both states' quest for energy security. Both states are net oil importers with Japan importing as much as 80 percent of its oil needs.  
In an attempt to access energy resources closer to home and diversifying beyond the Middle East, Japan and China both actively lobbied Moscow for an oil pipeline. Beijing pushed for a 2400 km route from Angarsk in Siberia to Daqing in China's northeast Heilongjiang province whilst Tokyo had favoured a 4000 km pipeline from Taishet to the Pacific port of Nakhodka. The Japanese-backed proposal was announced the winner at the end of 2004. However, with the sometimes tense relations between Japan and Russia, as seen most recently over Japanese Prime Minister Koizumi's sail around the disputed Northern Territories/ Southern Kurils on September 2, and Japan and Russia not having signed a formal peace treaty ending the hostilities of World War II, the construction of the pipeline may still experience several delays. Furthermore, China is not yet out of the picture as there are still discussions to build a branch from the Japanese pipeline to China by 2020.  
Closer to home, a territorial dispute between China and Japan in the East China Sea, which both sides claim as their Exclusive Economic Zone (E.E.Z.), is being further fuelled by reports of vast supplies of oil and gas in the region.  The disputed territory includes the Diaoyu or Senkaku islands and the Chunxiao gas field northeast of Taiwan, which according to a 1999 Japanese survey holds 200 billion cubic meters of gas.  Japan regards the median line as its border while China claims jurisdiction over the entire continental shelf. In 2003, China began drilling in the area after the Japanese rejected a Chinese proposal to develop the field jointly.  Although the Chunxiao gas field is on the Chinese side of the median line, Japan claims that China may be siphoning energy resources on the Japanese side.  But the energy conflict, which threatens to loom larger and larger in Sino-Japanese relations, is symptomatic of broader strains which can seriously destabilise the region eventually.

Japan’s embrace of a more aggressively assertive foreign policy line mirrors the approach of the Bush administration, and has thus far delivered comparably questionable results.  Several decades of warming ties to Korea have been undermined, and the country’s re-militarization is beginning to isolate the Japan within Asia, many of whom (Taiwan conspicuously excluded) having unpleasant memories of Japan’s wartime occupation.  Prime Minister Koizumi’s approach is not unique to him; his Cabinet contains many hard-line nationalists, who will likely continue this foreign policy line beyond his tenure in office.   Such an approach may well prove highly damaging to Tokyo’s longer term objectives, particularly vis a vis China.  After all, as Chalmers Johnson has noted, Japanese prosperity increasingly depends on its ties to China. The reverse is not true. Contrary to what one might expect, Japanese exports to China jumped 70% between 2001 and 2004, providing the main impetus for a sputtering Japanese economic recovery. Some 18,000 Japanese companies have operations in China. In 2003, Japan passed the United States as the top destination for Chinese students going abroad for a university education. Nearly 70,000 Chinese students now study at Japanese universities compared to 65,000 at American academic institutions. These close and lucrative relations, as with those of South Korea, are ultimately at risk if Japan persists in going down the military road and a once stable region, now known as the world’s savings repository, might soon find itself better known as the world’s new Middle East.