BluefoxToday blog : Appraisal Fraud is up 46% From Same Time Last Year

It is hard to believe with the current climate that anyone would participate in fraud.  Everyone is looking for a bad guy. 

Bill - LOL  Tell us what you really think Bill.  Ok, seriously now, I just had a convo with a Realtor friend and we were debating who the real culprits are of this increased fraud.  I'm saying it's the big, national, retail banks the bank owned AMC's.  My Realtor friend thinks it's still the brokers ordering FHA appraisals, of course, he was quick to exclude me from the statement as an exception to the rule.  LOL

Anyway, while he could provide no supporting argument to his opinion I could support my opinion with actual events. However, it did get me to thinking.  Could there be some truth to his opinion?  Hmmm...

Nooooooooooo..... not the banks!!! You mean the same ones that had their principles selling their own stock right before the market drove off the cliff? I'm shocked. Who would have thought that leaving the fox in charge of a shrinking hen house would lead to more ..ahemmm... irregularities?

Not a surprising outcome with that statistice.  Thanks!

GREAT blog post!  Funny.

The true value of something is what someone is willing to pay for it.  Why do we even bother with appraisals?

Amen brother!  Too bad not enough mortgage brokers contribute to NAMB our only real voice in Washington.  Since NAMB is underfunded and rarely receives contributions from it's members their voice is about as loud as a mouse.  Wake up brokers and start sending NAMB $20, $50,$100 if you want to be heard before the banks really do take over everything and you find yourself ansewring the phone, "Thanks for calling Wells Fargo how may I help you?

Great post and TBWS is a great resource!

It seems to me that no matter what is happening in the economy, there is always someone that can come up with a way to commit fraud.  It is sad!

Bill

I am not surprised BIG banks would be behind this but I sure would like to see more data and know which banks were involved. Can I take a guess....Bank of America and Wells Fargo? As for FHA, I know these loans skyrocketed after HVCC as the brokers still had control over the appraisal process, so let's see how the numbers look after January when FHA appraisals must be ordered by the BANKS or AMC's.

If there is still fraud involved then we have the real story here! The real problem is that the government still has not set up the overall entity whereby appraisers can complain if they are being pressured. The individual banks have numbers people can call, but what appraiser is going to call the BANK that gives them work to complain about that BANKS pressure on them. Chances are they will suddenly drop off their list without the appraiser knowing, although HVCC prohibits removing the appraiser from any list without notification and it has to be a good reason, like you are committing fraud or you are an incompetent appraiser. However they can work around that by reducing greatly the number or orders you get and just tell you that work has slowed down in your area. There is always a way around the GAME.  Trust me on that one.

I have real issues as you will see on my Active Rain posts with AMC's, they pay LOW fees to appraisers and charge the BANKS more than the appraiser would, but since BANKS own many large AMC's they are not out anything so it would seem. They are making big money off the backs of appraisers.

HUD has stated that the appraiser can now show in the report what they are paid from the AMC's for the appraisal and the AMC will have to show separately what their fee is. When people realize the Appraiser is being paid half the normal fee and the rest is taken by the AMC's AMC's heads will roll or so I would hope. Maybe if people stayed away  from these big banks, they would change their evil ways? 

Ha ha ha - your post made me laugh!  Nice use of some sarcasm.  Everyone had been predicting this would be the outcome when the contact was being cut off between appraisers and mortgage brokers...

Wouldn't it be great for the energy used in committing fraud to be turned around and used for something good instead? But then we would not have much negative to blog about.........

Bill:

If you read the report, you will see that Property Valuation Fraud RISK is up 25% from the prior quarter and 46% from 1 year ago, based upon the indicators used by Interthinx found in Mortgage Applications.  I did not find the word appraisal anywhere in the 16 page report.

Since (according to Interthinx) you live in the mortgage fraud capital of the United States, perhaps you have a different perspective than mine.  I can tell you from personal experience that lender pressure is perhaps 10-20% of what it was pre-HVCC.

According to Mortgagefraudblog.com (see link below), in a recent case in New York, 41 people were charged, of which one was an appraiser.

mortgage fraud blog

For someone to be involved in fraud in our current econmic climate they're either real stupid OR pretty confident about their actions.

Bill - I saw this early this morning as well.  Not surprising.  The HVCC legistlation makes about as much sense playing golf with a wiffle ball bat.

Mary Thompson makes a wonderful point in her comment above. 

I'm so glad this post was featured.  Maybe, just maybe, it will resonate with the powers that are and open up those beady little eyes of theirs. 

HA HA I love the sarcasm. Appraisers being sent to rehab at taxpayer's expense- too funny! You never know in this craziness! Have a great day!

I love the sarcasm its too bad that the mortgage broker I believe, has to suffer more than any other professional for this mess.  Or at least seems to be blamed more than those that actually masterminded it such as uhhhhh Goldman Sachs and others who were not as smart and went under

i agree, obviously the numbers are incorrect as hvcc has eliminated all fraudulent appraisals, right?

also, in many/most cases here in southwest florida you not only get an original appraisal, but frequently a review. low appraisal are probably the number one reason for denials, so it can't/shouldn't be there.

seller financing anyone?

Alarming statistics to say the least, good thing we have hvcc to protect everyone.

You need to work on your sarcasm skills.

Is it appraisal fraud?  I just don't see that happening not with the rules and regulations and underwriting and cross examinations and the calls I'm getting from underwriters to ask me my assessment of the home and I'm the listing agent.

Call me naive, but I just don't see fraud.  Maybe once or twice has somebody said something that didn't sound right and I told them 'that it didn't sound right.'  Not saying it isn't out there.  It obviously is.

Sarah in Nashville

In North Florida we have also had problems with low appraisals rather than high ones.

Hi Bill,

Thank you for sharing an informative and helpful article.

John Pusa

Great post.   This is so much nonsense, but hey change is good.

Bill,

Serves them well. HVCC was enacted too hastily. They didn't make the time to listen to all the relevant players on it and here are the results. Hopefully it'll be either modified or tossed out.

I don't know why my jaw dropped when I read this. It's really no surprise at all. And you're right, we'll all pay to teach those BAD appraisers how to do their job properly. I'd rather see them bagging groceries at the local SaveMart!

Sarcasm is my friend - and I see it is also yours!

Bill - boy, I would think that anyone involved in fraud now would be insane in our current environment...can't say I have seen any problems over the past year. 

I own a real estate brokerage + an appraisal company. My appraiser is not pressured to "get the number" at all. However, the true FRAUD is in the deals coming through right now that have NO COMPS to prove value, yet the deals are ridiculously high. Of course they send my appraiser the sales agreement and she knows what number they WANT to hit. But when she runs comps, the comps are NOT THERE to support the higher values. So she turns in what she has comps to prove, then everyone is unhappy! She does her best, but realtors must first price properties realistically, and buyer's agents MUST do their homework before writing an offer.

Fraud? How can it be? Didn't the government fix the problems with HVCC? That's what we were told....

Bill- I don't think there is more fraud-just more enforcement. It's like setting up Highway Patrol with a radar gun on a section of rural highway that didn't receive much enforcement in the past.  Speeding tickets go way up but no one knows how much speeding went on previously. 

WoW.. what a high rate of Fraud ! This is unbelievable to say the least

Every time the markets pick up, the same things happen again. In the end, banks are under pressure to perform and show number to their investors. It doesn't matter how they come up with them.

I happened to watch the TBWS video and I was surprised at that headline, but thanks to the comment above by Jesse (#12) there may be more to it than meets the eye.

We have only seen tip of the iceberg in my opinion. Follow the money and those people need to go to jail.

Some people just insist on doing things the dishonest way, no matter how many rules we put in place for them.

Hello Bill~  Jaw-dropping post!! and this topic definitely deserves a touch of sarcasm!!  All the best this holiday season!!

Bill, Small independent business is the salt in the market place.  Look at gas stations for instance.  You find the best service and prices at independent gas stations.  Where there are only Oil Company Owned stations you find the highest prices.  And who posts the highest corporate profits? Oil Companies and... I'm not against big business. I just don't believe big business should be the ONLY BUSINESS.

I guess I'm surprised by the number but then again banks need to produce or they lose investors.

I saw TBWS yesterday and laughed.  How do they pin this one on the brokers?  I know, brokers are now transitioning to correspondent relationships and are able to form their own AMC in certain instances (like the big banks) and those AMC's are the ones with the high levels of fraud.  It is just another way those pesky brokers are beat ting the system.  One of these days the truth will come out and the banks real role in this crisis will be exposed.  This will happen when all of us scapegoats are out of the business, then there will be no-one to blame but themselves!

The results of a hurried change, throwing the baby out with the bathwater. Thank God HVCC is on its last legs. Hopefully We The People will stand up and pay attention to these fast flowing regulatory changes and let our elected officials know they are accountable for their vote! Then maybe the mortgage brokers will have the money to pay their own lobbyists. One of the above comments references the increase in FHA loans which brokers used to still be able to order the appraisal on. I doubt it was simply the HVCC avoidance that led to this rapid increase, rather the demise of Fannie/Freddie loans with PMI as a viable tool for the buyers in the market.

This too in time shall pass. This is another case of over correction and congress looking for some one to blame for their incompetence.

HVCC was created as a result of WAMU's appraisal management company and a compromise with Sen. Schumer.  The brokers are getting the blame for what the banks did....the problem is brokers don't have the lobby power to buy the congressional votes....So, I became a mortgage bank.  If you can't beat them, join them.

Thank-you!! HVCC is yet another example of government OVER regulation AFTER the fact, too late. This was a failure from day one. Thank god it's going away because it did no good, just made out of towners appraise on the cheap and undervalue homes killing deals.

HA I just read France and Mark's comment, yes, it IS over correction, when will they learn, over reaction & over regulation after the fact always ends badly too?!

Shelly Whitworth
www.MorSystems.com

This is just nuts.  Will we ever return to normal?  I don't think I'd recognize normal if I saw it, it's  been so long since a normal market existed.  Craziness!

Yet another shattered dream.....who would think that the banks would be involved...gag gag!!!

I can't see how appraisal fraud could possibly be on the rise! But then again we do have HVCC, LOL!

Bill, These are amazing stats.. and if 46% is the known fraud, the numbers are probably pretty high for actual fraud.

That's terrible.!!!