Low-Cost E&O Insurance from OREP        Library/Previous Editions

Identity Theft - Appraiser Style - read story

> These Trainees should be thrown in jail for fraud and never be given a state contractors license. - John Hartig

> I am a state certified appraiser in the Miami-Dade county area who was a victim of appraisal fraud last year. The culprit was my ex-employer who would manually (not electronically) sign my name on appraisal reports which had inflated prices or for lenders who did not accept his own reports because he was black listed, or when the orders were generated by the mortgage company he and his partner owned so it would not show the conflict of interest. I immediately reported it to the state, provided the state with all the lenders I received reports from and even made a police report. 

I provided the state with the false documents I had obtained from the actual lenders who had requested the appraisals from my ex employer’s firm. The lenders/mortgage companies even had the appraisal request forms on file further proving what firm was sent the appraisal request and the actual fax number it was sent to. Some mortgage company employees who were involved and some who were not aware of what was gong on came forward. His mortgage company business partner came forward as well, only to get a letter at the end from the state saying that the probable cause panel found that it did not warrant the commencement of formal administrative action, and accordingly, the petitioner dismissed the complaint and closed the case.

This letter was signed by the acting chief attorney for the division of real estate. After receiving the letter I immediately called the state to speak with this person to no avail. After a month of leaving messages explaining that all I wanted to know is who I refer the bank/lenders to if I ever get a call from a bank with a falsified report that may be in foreclosure or if I end up getting sued by a firm who lost money due to the false reports sent out. I ended up getting another letter in the mail from the same acting chief attorney thanking me for my recent telephone communications to his office but unfortunately he cannot discuss the particulars of the above case matter of which I refer, as it is confidential per Florida statues. At no point did I leave a message asking to talk about the particulars in the case. All I wanted to know was what I do in the event that one of these files comes back to me with an attorney letter telling me I’m being sued since now the state sees no merit and has dismissed the case. What we need to do is unite as a group and voice our concerns. It's difficult (not impossible) for one person to make changes in the system, but as a group standing together we can definitely be heard and we will definitely be listened to and changes at the end will be made. If we allow for these instances to go on we the victims will not only allow our reputations to be damaged but our livelihoods as well. – Alex in Fla.
 

 > Only one thing to do: hire an attorney and press civil charges. In New York , in order to get an action started, the party pressing charges is held liable for ANY wrong-doing if the defending party (alleged wrong-doer) is found innocent. The other thing is to NOT hire trainees. I am now a one person shop after having 15 appraisers. There was too much responsibility for too little economic gain.  - Marc Dattoma, IFA  
 

> Your article on trainee fraud only touches the tip of the iceberg.  Increasingly, the producer's of high quality appraisals are being assaulted by hacks who will work for peanuts and produce "appraisals" that do nothing but further damage the credibility of our profession.  As noted in your article, most appear to be new to the profession and seem to be in it only for a quick buck. We have seen all manner of incompetence or fraud ranging from no adjustments, fake or irrelevant comps, across the board, six-figure, unsupported adjustments with final values that are hundreds of thousands of dollars above the highest sale, 3,000 square foot comps compared to a 1,500 square foot subject, etc. We pay handsome fees to an OREA who won't consider complaints or even take e-mails but appears only interested in collecting more fees from anyone able to sign a check.  Finally, we are forced to work for mortgage brokers, borrowers and banks whose attitude ever increasingly seems to be: hit the number, fast and cheap or go away. There appears to be little that can be done. Hopefully, lenders will get a clue as values stabilize or decline, but I'm not holding my breath.  - John Streb

> Read your article on signature fraud with great interest. As a newly minted Trainee Appraiser I can see why I had so much trouble finding a Certified Appraiser to review and sign my work. I am sure there are other problems that could also occur to cause the Certified Appraiser much grief. Please let anyone know to keep their digital signatures safe with a password to keep unscrupulous trainees from using it. If their digital signature is used without their permission it would not only be considered fraud but forgery and should be reported to their State Appraisal Board but also to their local law enforcement agency for prosecution. Such unlawful action by anyone involved with appraisal work not only has ramifications individual appraisers but our profession. I urge anyone with such problems to report it to their appraisal Board and to the police or District Attorney and follow up to make the guilty party pay for there unlawful acts. - Bob Smith, Robert Smith Appraisals

> The first thing is to reduce the number of trainees per certified REA to two (2). Next, require all sponsoring REAs to become licensed instructors. Assign trainees to one (1) office where the sponsor is a full-time worker (you can't train someone if you are at your other office one, two, three or more counties away). Then, I would create a state-approved syllabus and require reporting to the state. Finally, anyone who improperly uses (forges) another's signature should be reported to the police; forgery is a crime, conviction might prevent the offender from becoming licensed. - Arthur T. Nickel, MBA

> Your recent articles about trainee misconduct and fraud were interesting but not surprising. When appraisal licensing was first adopted, there was considerable debate about the federal government being too over-reaching and thus the federal appraisal licensing standards that were established were designed to be MINIMUM standards and the individual states had the authority to establish additional standards and regulations. One of the key gaps in our existing appraisal licensing laws is that there is no "trainee" licensing category.  In Arizona , when appraisal licensing was first proposed, I spoke at the public hearing and recommended that our state add a "trainee" category.  My logic was that if there was no "trainee" category, then the state appraisal board would be powerless to take any action against a trainee who violated appraisal laws.  Our state and many other states decided not to have a trainee category, and now I suspect they regret that decision. 

What is likely occurring is that very few if any state has a "trainee" category.  Based on how the appraisal regulations are written, each state's appraisal board only has jurisdiction when a licensed or certified appraiser violates the law. What appears to be happening is that the individual state appraisal boards are concluding that their authority is to regulate licensed appraisers, and regardless of what a trainee may or may not do, they are powerless to act since they don't regulate "trainees."

The reality is that no state law can prevent fraud or abuse by a trainee.  However, it would be very helpful and help minimize this problem, if each state had the proper charter and tools to address this problem. As long as each state is going to consider amending or improving their appraisal laws, there are a few other problems that need addressed, including:

1. Addressing penalties for individuals who prepare appraisals without the appropriate licensing;  
2. Addressing penalties for individuals who forge a signature or who inappropriately modify an appraisal without the express written consent of the original licensed appraiser;  
3. Addressing penalties for mortgage loan officers who attempt to improperly influence the independence of an appraiser or to improperly influence the outcome of the value estimate, including the threat of withholding payment until a desired value is achieved.

Current appraisal licensing laws are not perfect but should not be abandoned. Rather, we should assess their effectiveness and take steps to improve the laws in order to serve the public interest. It would be helpful if these issues could be addressed at the federal level in Congress. However, I suspect that might not happen and thus each state should be working to establish their own laws to address this problem.  

My suggestions would be to amend state laws to establish stiff criminal offenses for: 1) Individuals who prepare an appraisal without the appropriate appraisal license:  2) Individuals who forge an appraiser's signature, or otherwise modify an appraisal without the express written consent of the original licensed appraiser; 3) Mortgage loan officers or agents who purposely attempt to compromise the independence of an appraiser, including the threat of withholding payment until a desired value is achieved.  - Thomas J. Inserra, SRA

> I have not had signature fraud in the appraisal business but did in a previous line of work. I made a couple of different signatures that would tell me if on that day or that week it was my signature.  I might use the digital signature "Margaret Sheppard” in certain instances, or "Margaret A. Sheppard" or a third for real safety, "Margaret Ann Sheppard."  If a trainee leaves and you had been signing his/her appraisals "Margaret Sheppard," for the next month or so, I would sign "Margaret A. Sheppard" which they would not have on their computer. In that way I would be able to substantiate that I did not sign the reports in question because of the discrepancy in the signature for that time frame. - Margaret Sheppard

> Early this year, the appraisal section of the Office of Banks and Real Estate (BORE) of Illinois sent all licensed appraisers an e-mail on this issue. The office also initiated a policy of not publishing the license numbers of certified appraisers on its web site. That is one policy that all certifying/licensing boards of each state should take to eliminate one potential source of illegal appraisal activity.  - Paul M. Bauer

> Call your local FBI office and get them involved. Unlike state Appraisal Boards, the FBI has a budget for investigations.  :-) - Michael J Kaminski

> I’m wondering why the trainee had access to electronic signatures. I employ one trainee (who is great) and he has access to nothing other than the appraisal software itself. All signatures go though my computer only and while he does have access to it, he has no codes for signatures. Poor security measures seem to be the problem. My trainee signs the jobs he works on after we review them together. However, I put the signatures on. No one else has access, period.  - Kevin McNamara

> I think we should do away with the trainee program, increase the education hours and make them sit for the state exam. If they pass, they must have E&O insurance for themselves and be allowed to do their own work as an apprentice. They would be liable for their own reports, have someone to help answer questions but the person would not be liable for their reports. If they "choose" to not follow the rules and regulations, they will be the one fined or removed from the Appraisers State Licensure Board. The appraiser should not be the person who is liable for the trainee. You cannot make people ethical. If they haven't learned ethics by the time they enter a profession do you think they are going to change just because they are supposed to follow rules? I don't know who thought up this program but as licensed appraisers we are supposed to take on this problem; I don't think so. 

For every problem there is a cause and effect. The cause would be that we have swallowed the fact that someone at the Appraisal Board decided to institute these trainee programs. The effect is that now appraisers who have taken on the burden of the liability and a trainee who is unethical must pay the piper. While I am sure most trainees out there are ethical, the question is still- do you want the liability?  Let the trainee take their exams, be liable, market themselves and prove their strengths, just like we had to do. -Sharon Dunn

 
> Don't ever give them your signature password or change it when they leave...  and know who and where these people come from. Before their final pay check, you need to see them delete your software off any and all computers they may own. - Bob Lawrence, SRA, SRPA, CGA

> Those appraisers have missed the point. Forget the licensing board, call the police and press charges. Forging someone's signature is a crime. Let the district attorney and prosecutors work it out and let the trainee go to jail. Then give interviews to the local paper so that the next wanna bees know what happens when they screw up. - Chris Richardson
 
> Unfortunately, I find the article accurate as to what some trainees is doing – choosing income over professionalism. I find training appraisers commonly guilty of similar negligent practices. I hear about or see cases where training appraisers are having trainees, and in many cases non-licensed persons, doing the inspection of the subject property but with the licensed appraiser signing the report without having seen the subject. Seeking economic gain appears the issue.

As an instructor at the local college I am told of practices such as signing reports while not having seen the house; signing as Supervisory Appraiser, marking DID inspect when they didn't inspect also is common. Failing to indicate professional assistance in the report, finding comparables to support the needed value when market data more similar to subject is overlooked. Not indicating accurate description of the condition of a property wherein characteristics reflect deferred maintenance conditions. Overlooking off site negatives such as a power station next to property which negatively impacts appeal and many more!

As an instructor of USPAP and college level licensing courses, it is important to impress the student that ethics is a significant professional requirement - to know right from wrong and execute the responsibilities of the job properly and ethically. Unfortunately many experienced appraisers and newer appraisers learning how to do an appraisal, indicate wanting the economic rewards of being an appraiser but fail to adhere to the professional responsibilities of the appraisal profession. Being an appraiser and working in the business of appraising requires ethical conduct. Competency can be taught but ethical conduct cannot be. It comes from within the individual to understand what should and should not be, done.

Abuses by trainees are the reason why many lenders are no longer accepting reports signed by trainees. I consider a lot of the problems the fault of Supervisory Appraisers who fail to execute responsible oversight of the trainee working for them. Additionally, I find that loan officers do not care as they too want to reap the economic benefits of the loan. Many loan officers press for value and ask appraisers not to include negative property conditions. I have personally been involved with loan officers when they are notified that an appraisal is signed by an appraiser who never saw the house and they don't care about this. They just want to close the loan.

Problems created by the appraiser and lenders become known only after the fact. Lenders have loaned the money, borrowers have what they want, loan officers have been paid and then the problem is discovered. Years may have passed when the loan is found to be faulty. In many cases the loan then becomes a liability on the lender who holds it (most often not the originating lender). On investigation the poor practices are discovered. The originating lender and loan officer got paid. Maybe by the time the problem is discovered the loan officer is no longer in the business or at least not with the originating lender. The appraiser needs to be a professional! Ethics and competency must be recognized for their importance and ethical practices must be maintained! How can appraising be recognized as a profession when there are so many individuals doing what they are doing?  We need stronger and more timely investigations by licensing agencies about complaints by users of our services.  We need to police ourselves by reporting to the appropriate governmental agencies the practices we learn about or see. Only through diligence and responsible and ethical conduct can the "profession" of appraising be maintained. We must look to ourselves to lead the way. Each appraiser must accept the responsibility to do the job in a manner which is correct. Apply the skills; exhibit ethical conduct. Do not allow clients to have you do things which violate the requirements and spirit of the law. - Barry Cleverdon

> Here in Illinois mortgage fraud is running rampant as well. About 20% of the cases that are now coming to our board are fraudulent appraisals – actually forgeries. What is actually happening is that individuals (crooks) are going to the ASC lists and taking the names and license numbers of practicing appraisers and then going out and writing appraisals in their names.  Our department has actually (we think) identified the perpetrators of these forgeries but there isn’t anything we can do about them. The department only has power over appraisers – not forgers. Unfortunately the AG’s office and the Feds appear to have too much “other stuff” on their plates and have not gone after these people – the world isn’t a perfect place. It’s my guess that unless the lenders (those who have been losing money) are not upset and turn in the appraisers, nothing is going to happen. - Bob Gorman
 

> I have had several trainees, I just don't give them my signature, I review then put both our signatures on the report and send it to the lender. They don't even have access to their own signature's codes.  Because I know that this would happen, I made sure I had the only access to all signatures. By the way, I no longer use any trainees. I found myself working for them, rather the other way around. They would push garbage reports at me and would not hear my requirements for better reports, so I stopped using them. The industry is too often about how fast and how cheap you can do it. Training anyone is just plan silly to do when you’re trying to put out quality work first! - HR

 Working RE Home