KENNETH R. HARNEY is a columnist with the Washington Post Writers’ Group.
Have the real estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared from the marketplace?
Are mortgage loan officers and realty agents – even individual home sellers – continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior?
Ask appraisers and many will tell you: It’s still business as usual.
Attempts at encouraging inflated appraisals continue to be commonplace, though in some cases the techniques have become subtler.
“Absolutely appraisers continue to get pressured” to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country’s largest professional organization representing appraisers.
“That has not changed yet,” added Garber, even though recently signed federal housing legislation toughened appraisal standards and the Federal Reserve’s new truth-in-lending rules ban interference, bribes or intimidation designed to influence appraisers’ valuations. The most recent national poll of appraisers, conducted by October Research Corp. two years ago, found that 90 percent of those interviewed reported some form of interference or intimidation by retail loan officers, brokers and third-party appraisal management firms, among others.
Gary Crabtree, principal of Affiliated Appraisers in Bakersfield, Calif., says “it hasn’t gone away,” and there are even some developments on the horizon that could make things worse. Starting Oct. 1, a new federal foreclosure-relief refinancing program gets under way that will require lenders to write down the value of distressed houses to 90 percent of current market value to enable borrowers to be refinanced.
Sara F. Schwarzentraub, president of Inter-State Appraisal Service of La Mesa, Calif., recalls how one client left a recorded message on her office phone complaining that, “If you didn’t know you couldn’t hit what was needed, you shouldn’t have taken the assignment.” The number needed by the caller – a mortgage company employee – was $50,000 to $60,000 higher than current comparable values in the area could support, according to Schwarzentraub.
According to Frank Gregoire, immediate past chairman of the Florida Real Estate Appraisal Board and an appraiser in the St. Petersburg-Tampa area, appraisers still routinely receive probing e-mails and phone calls from lenders and brokers.
Part of the reason in today’s market environment, he said, “is that things are tough, sales volumes are down, and some lenders know that they’ll eventually find someone who’ll cooperate.”
Only when federal and state governments severely punish unethical appraisers and the people who pressure them “will all this start to get under control,” Gregoire said. But he sees some signs for optimism: State regulators in Florida and elsewhere are cracking down increasingly on appraisers, even stripping away their licenses. And the new federal legislation authorizes financial penalties to be imposed by the secretary of housing when appraisers are found to have caved to pressure and cooked the books to inflate values.
