Appraisal Fraud Plagues Mortgage Market

by Tim Manni

The housing crisis has many little helpers that have contributed to its devastating effect. Real estate agents and mortgage brokers seeking higher commissions through an inflated home-sale price, have sought out home appraisers to fraudulently estimate the value of a home:

After the nation’s last major banking disaster, Congress set up a system to catch rogue appraisers. Their game: inflating the value of homes at the direction of equally unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.

But a six-month Associated Press investigation found that the system is crippled by both the bumbling of its policemen and their inability to effectively punish those caught committing fraud.

And despite ample evidence that appraisers are pressured into inflating home values — sometimes to prices in support of loans that are more than buyers can afford — the federal regulators charged with protecting consumers have thus far made a conscious choice not to act.

Tags: Appraisal Fraud, mortgage

5 Responses to “Appraisal Fraud Plagues Mortgage Market”

Eric Hundin Says: August 27th, 2008 at 5:16 pm

I found your blog on MSN Search. Nice writing. I will check back to read more.

Eric Hundin
Michael Says: August 27th, 2008 at 5:57 pm

We have developed a software package to curb this type of fraud along with many other types of fraud. Visit our website at http://www.propertyfraudprevention.com and ask how you can save your company from the depths of such senseless acts of crime!
Rebecca Wilder Says: August 28th, 2008 at 9:18 am

I agree, the home appraisal business seems kind of shady. Just yesterday, I saw a new home appraisal business set up shop in a ominous-looking office space. No meaningful sign above the door, just the name and phone number pasted on the window using white stickers. Kind of ironic that home appraisals are valued now more than ever in order to attach affordability to a mortgage application.

I have heard that one does not need a license or certificate of some sort to verify training in order to become a home appraiser. Is that true?

R
Tim Manni Says: August 28th, 2008 at 12:28 pm

Rebecca,

According to http://www.appraisalinstitute.org there is a state administered licensing and certification exam.

From http://www.appraisalinstitute.org/education/start_career.aspx#education:

Education

The Appraiser Qualifications Board (AQB) set new minimum education criteria that became effective in all states on January 1, 2008. The new criterion includes an increase in the minimum number of hours required to become licensed or certified, and specifies specific topic areas to be covered by these courses. Also, the criterion includes more in-depth topic coverage and increase in hours. There will also be a new uniform state licensing/certification examination, and a college degree requirement for the certified levels. If you are just beginning your education, or were unable to complete your licensing or re-licensing education prior to January 1, 2008, you fall under the new education criteria.

Experience

Trainees looking for a supervisory appraiser should note that effective January 1, 2008, a supervising appraiser must be either a certified residential or certified general appraiser in good standing and not subject to any disciplinary action within the last two years that affect the supervising appraiser’s legal eligibility to practice appraisal.
Rebecca Wilder Says: August 28th, 2008 at 3:34 pm

Awesome, glad to hear it!

Thanks! R