Appraisers Fighting Back!
by David Brauner, Editor
The good news this issue is that there is plenty of good news to report on issues important to appraisers: curtailing mortgage fraud, limiting broker price opinions, putting the breaks on data mining of appraisal reports, understanding and combating blacklisting, supporting appraiser independence.
The common theme is that appraisers are “doing it for themselves”; taking action and making a difference on a state and nation level. Here’s what we are talking about.
The website MortgageFraudWatchList.org is the result of appraiser Pamela Crowley’s frustration with rampant mortgage fraud. Many complain but one acted. The intention of the site is to curtail mortgage fraud by providing a place for appraisers and others to report suspicious activity anonymously. The site is beginning to produce results as it gains acceptance among appraisers, lenders, GSEs- like Fannie Mae and Freddie Mac, regulators and law enforcement. Read more about the site.
For years appraisers have suspected that lenders and others mine data from their appraisals without permission; some insist the purpose is to feed AVM databases (automated appraisals). Lenders, AVM vendors and other insiders steadfastly deny it, including in these pages (Mythbusters: Are AVMs Stealing Your Data?). In a federal class action, a small group of appraisers from across the country has filed a complaint against FNC, Inc. for allegedly saying one thing but doing another with their data. The complaint alleges false advertising, misrepresentation, breach of implied contract and more. It asks $5 million in damages. Learn more about the complaint.
The blacklisting of appraisers by lenders- placing them on exclusionary lists, is the latest tremor to rock the industry; as more loans default, more shoddy and dishonest appraisals surface and more lenders, as a result, press to root out and remove the bad apples. In a fairly clumsy process, however, innocent appraisers are caught up in the nets along with the guilty and incompetent. It is costing many innocent appraisers money, time and sleep.
In the story Appraiser Blacklisting: Fighting Back from last issue, we first reported on what now seems commonplace: an appraiser tried, convicted and banished by a lender without the opportunity to defend himself. As the subject of that story Michael Read says, “I was on the Exclusionary List for over two years without knowing anything about it. I was accused, convicted and punished without ever facing my accuser. What country am I living in?”
Worse still for Read and others like him, is that the bad report was circulated in the lending community, causing others to convict him also. Read fought back and cleared his name. He reports, “Since the story, I have heard from many appraisers with similar problems, each wanting me to assist them in their battle. I’ll do the best I can. What is more interesting is that the lender has contacted me saying they are instituting new policies and training to prevent the same thing from happening again. If you can take them at their word, this is a good development.”
In response to the piece, we also heard many horror stories, including locating the source of the bad report but not being able to gain access to it! The name of one lender-supported information clearing house that came up again and again is MARI. So we interviewed them to learn their purpose and process and to shed light for appraisers trying to clear their name. Read the interview to get some insight.
In Ohio, the state’s Attorney General is suing a group of mortgage firms under the state’s new predatory lending law. In Colorado, legislators have approved a measure that would make it a crime to pressure an appraiser or falsify an appraisal (see Industry News).
Getting it Done in Arkansas
Arkansas Appraiser Tom M. Ferstl, MAI, SRA, EAC wrote us in response to last issue’s Cover Story, AVM Tango! Man or Machine? He sent us a copy of a 2007 bill that he authored which restricts Broker Price Opinions (BPOs) from being “treated like appraisals” in his state. Act 540, according to Ferstl, “Effectively bans the use of BPOs in Arkansas that contain the words ‘appraisal’ or ‘market value,’ if the report is for a federally-related transaction or sale of a loan via interstate commerce. If you catch a real estate agent or appraiser using a BPO as a ‘cheapo’ appraisal, you simply turn the appraisal into the Appraisal Board for prosecution as a Class ‘B’ Misdemeanor.”
Ferstl also was instrumental in passing Act 1035 in 1987 which allows appraisers to file a lien against property that is the subject of an “unpaid” invoice for appraisal services. “A very potent collection tool,” says Ferstl.
According to Ferstl, both pieces of legislation would not be possible without a strong state appraiser group. In his state, it’s the Arkansas Appraisers Association. “After licensing, we soon realized that working appraisers needed a united voice to address legislation and to confront out-of-control licensing boards. An appraiser coalition, such as the Arkansas Appraisers Association, seemed like the best way to involve all appraisers, leaving no one out of the process.”
“As one of only two appraiser-attorneys in Arkansas, it seemed logical that I would be the spokesperson for the rank and file, given my familiarity with the law and with legislators, and that I was comfortable getting up and presenting our position before the various legislative committees,” he said.
The organization was formed as a voice for the overall appraisal field, he says, and it now has several hundred members representing over half the appraisers in Arkansas.
“It is important for each state to have an active appraiser organization that crosses the boundaries of the recognized professional appraiser groups, as no one group is strong enough to go it alone. In addition, an organization such as our Arkansas Appraisers Association is able to motivate the vast number of appraisers who do not belong to professional groups, such as the Appraisal Institute, NAIFA, IAAO, etc. We have found that when an appraisal trade group tries to pass legislation by themselves, they tend to alienate members of competing groups and the appraisers who belong to no group, thus condemning their efforts to defeat.”
Read Arkansas Acts 540 and 1035. For further information, please visit http://www.arkansasappraisersassociation.com/. If you have passed similar legislation in your state, send the details along and we’ll share it with the nation’s appraisers.