"Drive-By" Valuations Worry Australian Regulator
The Australian reports that appraisals and lending standards are under review in that country as well. "The nation's banking regulator has warned home lenders that their cutting corners on property valuations could expose them to unacceptable levels of bad debt in a major downturn."
"In some cases, banks are using cheaper, 'drive-by' valuations with no internal inspection, or even a 'desk-top' approach involving statistical analysis and comparative prices in the same suburb. An APRA survey of 96 lenders who control the $500billion mortgage market found that some lenders physically inspected fewer than half of the properties they used as security for loans."
"Ian Herriott, 'There are many lenders relying on computers to do their credit analysis, and in a falling market it's a recipe for disaster.' Property prices have been under pressure since last year when the housing bubble began to deflate. Investment bank JP Morgan said earlier this month that prices could fall by as much as 10 per cent over the next 12 months, even without a further rise in rates."