How widepread is appraisal fraud? According to one study, more than half, 55 percent, of all appraisers have reported feeling pressures from lenders, brokers and their bosses to overstate property values.
According to David L. Fry of O’Fry Associates Valuation Management: “Pressure on appraisers to ‘hit the number’ has been a standard practice of the real estate industry for years.”
Fry also stated: “Enforcement efforts by state licensing boards are hampered by limited staff and budgets. Appraisers know this, so there is little fear of getting caught. Many users of appraisal services–banks, mortgage companies, real estate services companies ect., won’t report ‘aggressive’ appraisers to their state licensing boards of fear angering clients or some perceived liability”
From the wire: Capitol West Appraisals of Boise, Idaho, says in a lawsuit filed in U.S. District Court in Seattle that Countrywide loan officers pressured its appraisers to increase valuations or otherwise compromise appraisal standards in three loan transactions and, when the company refused, Countrywide put Capitol West on its “Field Review List.”
Countrywide, the nation’s largest home mortgage lender, doesn’t accept reviews from appraisers on the Field Review List unless they’re accompanied by a second review from someone else, the lawsuit says. That means brokers won’t use the appraisers at all, since brokers won’t pay for two reviews, Countrywide is such a major player and brokers do not necessarily know which lender they will use when they order an appraisal, the lawsuit alleges.
“Countrywide is in a position to force out of the business honest appraisers,” said Steve Berman, the lead lawyer in the case and managing partner at Hagens Berman Sobol Shapiro in Seattle. “They can use their market power to basically blackball these people.”
Eloise Hale, spokeswoman for Bank of America, which bought Countrywide in July, did not have a response Wednesday.
“We have not had a chance to review the lawsuit and would not be able to comment,” she said.
Source: Realty Times and the news wire