The appraisal problem is a well-known factor in today's world, but no one wants to tackle the solution. I'm sure that the directors of the Federal National Mortgage Assn. know the problem and the solution, but refuse to act because of the millions of dollars involved and the pressure from the mortgage bankers' lobby.
The Federal Housing Administration has operated for almost 50 years, and has never had the problem of phony appraisals, except for a few isolated cases. The answer is that FHA selects the appraiser and reviews about 15% of his work. No one has his hand in the appraiser's pocket, and he can be the independent third party that he must be.
FNMA has played footsie with the mortgage bankers. The mortgage banker, using other people's money and working on a commission to package a loan, selects his own appraiser. The appraisal is reviewed by his own underwriter, adjusted for conformity and passed off to FNMA.
The results of this "dual conflict of interest" have been a disaster to the lenders, and they are going crazy seeking a solution: FNMA has increased loan requirements and now changed the definition of appraisal. They have painted the brown horse black; however, it is still the same horse.