Industry News

Industry News – Volume 17

States Fighting Back
Ohio Attorney General Marc Dann has filed a lawsuit against 10 mortgage firms under the state’s new predatory lending law.  The firms are being accused of influencing appraisers to “puff up” their property appraisals above market value.  This has resulted in buyers owing more than the property’s worth and making it difficult or impossible to refinance, frequently resulting in foreclosures. Dann says he won’t allow this unethical exertion of power over appraisers who face the decision to do the right thing over losing business to continue.  In each case, Dann is seeking a court judgment that the firms violated the state’s Consumer Sales Practices Act and a permanent injunction barring them from the same activity in the future.  He is also seeking a $25,000 civil penalty against each firm and seeking a court order requiring the firms to reimburse consumers who were damaged by the activities. For more details, read Dann’s press release:

Rocky Mountain High
June 2007, Colorado Gov. Bill Ritter signed a package of mortgage- related bills aimed at protecting consumers and stemming the state’s ongoing wave of home foreclosures. The bills will help prevent future foreclosures by reining in questionable mortgage brokers who have contributed to the state’s foreclosure epidemic. Under these new bills, brokers must act on the behalf of the borrower in good faith and fair dealing, are prohibited from trying to influence the judgment of a real estate appraiser, and must now be licensed by the Division of Real Estate while getting adequate training, testing, and continued professional education. Visit the Governor’s web site to learn more:

Truth in Lending
There is a bill moving through Congress that would create a national system for registering the residential mortgage loan industry.  As a proposed amendment to the Truth in Lending Act, “The Fair Mortgage Practices Act of 2007,” sponsored by Rep. Spencer Bachus (R. Ala), will help to enhance consumer protections and support anti-fraud measures. The bill will require each lender to complete a one-page form during the mortgage loan process which will disclose the amount of the loan, appraised value of the property and the percentage of the value that is being borrowed. It will clearly spell out the number of years on the loan, the interest rate, the borrower’s monthly income and what would happen if rates increased. To read the complete text and the latest status of the Fair Mortgage Practices Act of 2007, visit and type in HR 3012 at the Search Bill Text field.

Security, Fraud and Liability
Security is on the minds of appraisers as stories of identity theft grow and circulate. It’s not just signature fraud anymore. Several appraisers at the a la mode convention in June witnessed to how their work was stolen, altered or completely fabricated without their knowledge and to what it took to set the record straight. Many learn there is a problem only after they realize they are blacklisted by a bank.

One speaker, appraiser Kirk Pruitt (, shared how any PDF file can be cracked and altered with minimal effort and that PDF “file security” is a myth.  Any file can be reverse engineered, he says. The solution is third party verification of appraisals through some kind of a “registration” system. Most of the leading software vendors are working on some form of third-party verification for their clients. You should be hearing more about this shortly. 

Pruitt offers five things you can do today to protect your identity: 1) Third party appraisal verification, which should be available soon. 2) Appraise your clients. Know your clients and asses their potential to commit fraud. 3) Digital signatures. Be extremely protective of your digital signature and never share your password. 4) Stop attaching your credentials (E&O declarations page and license) to websites and/or your appraisals. “You’re basically expediting a fraud package,” Pruitt says. Always keep track of who you send work samples to as well in case they are not legitimate. 5) Keeping reliable records is imperative. Store the original PDFs on a CD-Rom in case you have to some day prove your case. Pruitt suggests this related reading regarding PDF security:

Finding Foreclosure Work
We received many inquires about where to find foreclosure work, in response to a recent story we ran in our Online Edition in which long-time Texas appraiser Clark Gimple, IFAS shares (with a grin) that the best thing about all the bad lending over the last few years is the flood of foreclosure work he’s enjoying today. He says the appraisals are full fee and usually free of pressure; lenders want to know the value.

Gimple offers the following three companies as sources for foreclosure work nationally. Ocwen Realty Advisors- Ruba Latif (;, Sarah Selfman (

Gimple says, “I’ve done work for all of these companies in the past. Of interest is the fact that all three have recently (June 2007) contacted me to update my data with them to prepare for an increase in appraisal orders due to a foreclosure backlog.”

Gimple, appraising 30 years adds, “Typically an appraiser deals with four parties when performing a real estate appraisal; the lender, real estate broker, buyer and seller. Often, one out of the four is less than satisfied with the appraisal. In foreclosure work you deal with only one party (lender or management company) and all they want is a supportable market value. They do not question an appraiser’s professional work product.”

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