Freddie Mac software to fight home appraisal fraud

[Phil Rice]

The article says:

"The share of mortgage appraisal frauds grew from 5 percent in 1995 to 17 percent in 2000. "

Am I reading this right? 17 out of 100 appraisals are fraud? I have been around the block a few times, I know that it does happen, but I have to question the validity of this statistic!

How would anyone measure it? Some kind of random sample? What constitutes fruad vs an honest mistake vs the appraisal is right and the person doing the analysis is wrong???

If it is true, 17% fraud, what does that say to all of us honest appraisers? We need to get this fixed or we are going to see the whole appraisal industry go down the toilet.

 

[The Bob]

If this software is so accurate, then why not just do away with appraisals in the first place? If the software is using data in the appraisal, then how do they know which data is accurate and which is bogus? The bad appraisals I've seen all looked good on paper. All the adjustments were in line, distance to comps within limits etc... It was only by going out and looking at the subject/comps and market data that you would see it was BS. The bad appraisals I see don't make negative adjustments when they should, they use no/low adjustments for superior comp features like GLA, quality, location etc... And they ignore needed repairs and inferior condition.

 

[Phil Rice]

After thinking about this, my best guess is that the article means:

When there is a foreclosure and the lender loses money, 17% of the time they can blame the whole thing on the appraiser. And the other 83% of the time there was no appraisal done?

 

[Pamela Crowley (Florida)]

Originally posted by Phil Rice@Apr 14 2003, 09:04 AM
The article says:

"The share of mortgage appraisal frauds grew from 5 percent in 1995 to 17 percent in 2000. "

Am I reading this right? 17 out of 100 appraisals are fraud? I have been around the block a few times, I know that it does happen, but I have to question the validity of this statistic!

How would anyone measure it? Some kind of random sample? What constitutes fruad vs an honest mistake vs the appraisal is right and the person doing the analysis is wrong???

If it is true, 17% fraud, what does that say to all of us honest appraisers? We need to get this fixed or we are going to see the whole appraisal industry go down the toilet.

Phil,

In my market area, I'm very afraid it might be much higher than 17%.

Some days I feel like I'm sitting in the middle of a mine field of fraud.

 

[Mary E Perry]

1/3 of the appraisers in my area committ fraud - there's only 3 of us and it has only taken the one to get the market here so skewed.

Example: The bad apple had been in town appraising about 8 months. (This was about 6 yrs ago) I reviewed some of his work and saw inflated values jumping right out at me. (I was reviewing for quality control - so all the sales had closed and the realtors were all tickled pink). Of course the opinion of value changed in my Review but nothing was done. Yes, I know now that I should have reported him but I thought the lenders would see they got some bad loans out there and get him in line. (As Cher sings "If I could turn back time").

Before long all realtors were turning in inflated contracts. Well the writing is on the wall how the scenario went. When the two ethical appriasers turned in their work a lot of deals went south. To remedy the problem the bad apple did all the appraisal work that involved transfer of real estate and the other ethical appraiser and myself were left to do the refinances and the For Sale by Owner appraisals. That went on for about 2 yrs. which was just long enough to skew the market. Then all appraisers had market data to support the inflated housing values that the realtors got rolling.

Sad thing is I don't think anything will ever change because there is no way that appraisers as a group will ever have the lobbying power to make changes like the Bankers & Realtors do.

Mary

 

[Carnivore]

Mary and all,

The National associationof Realtors is the only organization we can join where we have an equal vote. The MBA only allows us to join as assoociates with NO SAY.

So I suggest that if you have not joined the NAR that you do so immediately and lets fight this from within.
By joining we increase the ranks of the NAR a very powerful lobby, who are more Powerful than the MBA.

 

[Pamela Crowley (Florida)]

Commission driven LOs and Realtors picking their pet appraisers to make whatever value they want and blackballing the honest appraisers.....

All the reports lately about the lack of 'affordable' housing....
Housing costs exceeding the average incomes to be able to afford the payments.....

SO..... now we have our dear government along with the lenders and Realtors pushing for those 'helpful' programs to have the taxpayers foot the down payments and closing costs......

Can you say 'Artificial Inflation'!!!!!!!

Looks like a dangerous ride to a nice bigger bubble to me.

 

[walt kirk]

Hey FREDDIE MAC,
I have a great idea which would eliminate inflated appraisals and mortgage fraud. Now this seems simple but it would work without establishing complicated programs or paying AMC's. Here is how it would work.

1. Create a list of well qualified appraisers who live and work in the areas in which they are assigned work.

2. Send the appraisal assignments directly to the appraisers. Do not allow the mortgage solicitors or brokers any contact with the appraisers.

3. Be sure to let the appraiser know that future assignments are not based on any result other than the truth.

4. Pay the appraisers the full fee for the appraisal, no fee splits or AMC fees.

I know that this seems radical but if you treat the appraisers like valued professionals you will get valuable professional results.