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OREP:
Low cost, same-day E&O Insurance
Fraud
or Incompetence: You Make the Call
by David Brauner, Editor
When
recent sales used as comps turn out to be "flips" with inflated
values, for example. Changes reflected in the new Fannie forms are specifically
geared to make "innocent mistakes" less likely and to hold appraisers
more accountable (so be careful). Since most appraisers who bend the rules
do so just to keep orders flowing (and not to get rich quick), one question
Disney believes worth asking is: "Is this really worth my license?"
Fraud/Complaints
Soar
“Based on my
observations in the
“The complaints typically are categorized into three areas, 1) ethics, 2)
competency, and 3) negligence. Upon investigation we discovered in Kentucky that
the problem areas are linked or attributed to 1) real property appraiser
education course content, 2) deficiency in training by a supervising
appraiser, and 3) pressure from clients to ‘hit’ a target
value. Item three (3) appears to be the area with the highest
frequency of complaints in the past three years,” he said.
This is supported by the U.S. Department of Justice Federal Bureau of
Investigation, Criminal Investigative Division publication titled
“Financial Crimes Report to the Public,” (May 2005). The report lists the
number of mortgage fraud cases pending as 436 for 2003, 534 for 2004, and
642 through the second quarter of 2005. During the same period the
numbers of mortgage fraud convictions and/or pretrial diversions listed 256 for
2003, 172 for 2004 and 95 through the second quarter of 2005.
Based on the information and the findings in cases before the Kentucky
Board, Disney says it is apparent that the number of complaints originating
from financial institutions and review appraisers has also
been increasing steadily for the past three years. The
interesting part of the complaint puzzle is the type of activity that is
alleged and, in many cases, proven to have occurred, he said.
“In
one case it was discovered a property was purchased for $25,000. Within a
very short time, without any repairs or modernizations, the same property
allegedly sold for $100,000 and appraised for $90,000. There was no support
for the value opinion and no support from the comparable properties in
the market area of the subject property. The same lender and appraiser were
involved in many similar occurrences- multiple, back-to-back transfers of the
same property, each time at a significantly higher dollar amount,” Disney
said.
Scam
Alert
According to Disney, appraisers should beware of the following scam, which is
growing in popularity. A property is listed for sale. A buyer’s agent
contacts the seller’s agent and informs him/her that the buyer will pay
the list price but has no money for a down payment.
The can make the deal work, they say, if the seller agrees to an
unrecorded second mortgage or a seller-paid concession “outside”
closing for the amount equaling the desired down payment. The selling agent
is advised that the property must be withdrawn from the Multiple Listing
Service at the lower price and re-listed immediately for a higher price to
include the necessary down payment. When questioned about this practice the
selling agent is told, “Don't worry, we have a lender and an appraiser
who understands what to do and we can make this happen.”
According to Disney, this scenario happens all the time. “Appraisers and
agents should be aware that the above act or any act of willful deceit to
assist in obtaining a loan secured by a federally-regulated financial
institution is considered bank fraud and carries the possibility of a
$1,000,000 fine and 30-years imprisonment.”