"Its time to protect the homeowner from immoral behavior in the lending industry." (petitioner comment)
Appraisers fed up with what they say is the "make the deal" mentality of lenders and real estate agents are fighting back with a public petition on The Appraisers Forum. The following letter is addressed to the Appraisal Subcommittee (ASC), Federal Financial Institutions Examination Council:
"The ASC's mission is to ensure that real estate appraisers, who perform appraisals in real estate transactions that could expose the United States government to financial loss, are sufficiently trained and tested to assure competency and independent judgment according to uniform high professional standards and ethics." From the ASC website.
The concern of this petition has to do with our "independent judgment" in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.
This pressure comes in many forms and includes the following:
- the withholding of business if we refuse to inflate values,
- the withholding of business if we refuse to guarantee a predetermined value,
- the withholding of business if we refuse to ignore deficiencies in the property,
- refusing to pay for an appraisal that does not give them what they want,
- black listing honest appraisers in order to use "rubber stamp" appraisers, etc.
We request that action be taken to hold the lenders responsible for this type of violation and provide for a penalty on any person or business who engages in the practice of pressuring appraisers to do dishonest appraisals that do not provide for independent judgment. We believe that this practice has adverse effects on our local and national economies and that the potential for great financial loss exists. We also believe that many individuals have been adversely affected by the purchase of homes which have been over-valued.
We thank you for your cooperation and assistance."
Petitioner comments from among the 4,300 signatures thus far on The Appraisers Forum:
The importance of a truly independent and impartial third party in a real estate transaction cannot be over-emphasized.
After 24 yrs as an appraiser I am leaving the business as I cannot compete with the dishonest appraisers.
I have lost so much business over the years for being honest. Mtg. Brokers should be salaried, not commissions.
Appraisers are like pawns in some mortgage brokers game. If they don't get what they want, they blacklist you.
The single greatest problem appraisers face today is coercion by lenders. New legislation is desperately needed.
Licensing appraisers without enforceable standards has ruined the profession and will eventually lead to another banking mess.
Coercion requires 2 players. Lender-lobbyists have "bought" the referees. Only dishonest appraisers can thrive in this game.
Banks are about to do to the FDIC what has already happened to the FSLIC - does anyone think that was fun?
Title 18 U.S. Code Sec. 1014-"...making false statements -is punishable by fine of $1 million or 30 years in prison, or both"
Mortgage industry appears to be eliminating need for appraisal, e.g. FHLMC, FNMA credit based lending. Buyers not protected.
Fed up with being the "fall guy" for crooked brokers and loan originators. I only do business with banks now.
I hate pushy lenders...and I hate what they have done to my profession.
Why have appraisers? Mortgage bankers should do the valuing of properties!
Check out dberryappraisal.freewebtools.com for my opinion on this subject.
Appraisers alone don't have the horsepower to rectify this industry wide problem!
The whole process appears corrupt from the RE sales agent-to the loan officer-to the appraiser who collaborates with them.
Most orders I receive contain an estimate of value and/or a predetermined value which will make the loan "work"
Money talks, lenders have the money, politicians listen.
I don't do much mortgage work anymore because of pushy lenders.
I remember the late 80's to early 90's when I was appraising properties for the FDIC during the bank takeovers. It's coming!
The Appraisal Institute, a leader in residential and commercial real estate appraisal education, research, publishing and professional membership designation programs has sent a letter to the House and Senate Banking Committees expressing some of the same concerns.
"The Appraisal Institute has called for congressional hearings on the lending community's ability to unduly influence the independent judgment of a professional real estate appraiser.
"Our members report that, too often, real estate mortgage creditors, lenders and realty agents attempt to apply undue influence on an appraiser to artificially 'make the value' on a property being appraised," wrote Brian A. Glanville, MAI, president of the Appraisal Institute. "Such pressure is problematic for the entire real estate industry because it leads to inflated home values, causes aberrations in the marketplace, and decreases bank safety and soundness and can damage the credit of homebuyers"
"The Appraisal Institute letter suggests that increasing lender accountability for the appraisal of collateral property may be effective in curbing undue lender pressure. Creditors, lenders or realty agents can pressure appraisers to deliver a predetermined appraisal value by threatening to withhold future business, and may search for an unscrupulous appraiser who will agree to meet their value goal."
Last year, legislation was introduced in the House of Representatives that contained a provision meant to address this issue. Section 129A(g) of H.R. 3901, states: "No creditor may compensate, directly or indirectly, coerce, or intimidate an appraiser for the purpose of influencing the independent judgment of the appraiser with respect to the value of real estate that is to be covered by a conforming home loan or is being offered as security according to an application for a conforming home loan."
"We were very pleased that members of Congress have come to recognize the very real problem that undue lender pressure on independent appraisers represents," Mr. Glanville noted, "and the language in the recent legislation reflects concern regarding this issue. We hope Congress will continue the process by considering this issue in committee hearings soon."
Pat Rioux
