Treasury May Expand Mortgage Fraud Rules

[T.E. Faravelli]

Back when licensing was first implemented in CA (1991) I was working as a staff appraiser at BofA. All the appraisal requests did not have a loan amount nor an estimated value as these were the rules. Guess what happened? Loan closings plummeted by 1/3. The M.O.'s had it changed so all requests had, at a minimum, the loan amount. Guess who was on the ASB at the time? The chair was a senior BofA VP of appraisal and they, I do believe, had another BofA appraiser on as well. I do believe the entire boards were comprised of employee's of banks, S&L's and other lending institutions. Someone said it best earlier, he who has the gold makes the rules. The only way to change this is to pass a version of Sarbenes/Oxley which would take away the authority and power of those who control the appraisal process and empower those whom are not compensated employee's of such. But alas, I'm daydreaming.

 

[Claude From NY]

Originally posted by T.E. Faravelli@Mar 13 2005, 01:13 PM
I do believe the entire boards were comprised of employee's of banks, S&L's and other lending institutions. Someone said it best earlier, he who has the gold makes the rules. The only way to change this is to pass a version of Sarbenes/Oxley which would take away the authority and power of those who control the appraisal process and empower those whom are not compensated employee's of such. But alas, I'm daydreaming.

You're right. How is the public trust supposed to be protected when the the fox is allowed to guard the hen house?

 

[Austin]

This town I work in was heavy in textiles and tobacco both of which have been wiped out. Our city tax office has an excellent on-line record system with which I can do sale searches and find all comparable sales for the town going back about three years.
I have done this four times and got the same result all four times: I did a sale search from June 1, 2004, to date; house size 700 to 1,700 sf, one/two story; and up to $70,000. The percentage of mortgage/bank/institutional involvement in transactions is approximately 40% meaning that 40% of the buyers or sellers are either mortgage companies or institutions.
Here is one example of what I am seeing over and over again. Subject property belonged to the mother-in-law of the CEO of a bank I do work for. I appraised it for him about seven years ago and he sold it for $45,000. A couple weeks ago a borrower applies for a loan at this CEO's bank to purchase the house. I do the appraisal and search the sale history. I have seen these same numbers scores of times and don't understand them. Lender took the property back last April 2004, with an outstanding loan balance of $53,000. Listed the property with a Realtor for $29,000, and it was under contract for $23,000 with an extra residential lot adjoining.
Starting in January of 2005, the first 12 residential appraisals I did, 11 were properties purchased by speculators for 30 cents on the dollar and all wanted cash out on the deal so they could buy more houses. I nearly got in a fight with one dude because he insisted that I not report the sale history because it might influence the bank.
In my view that is worse than it was during the depression. I have not heard one word about this locally and apparently I am the only one that knows it.
To be perfectly honest-I don't think the banks give a damn. If I just ignored the problem and put a good number on it they would be happy. These mortgage companies must be taking a licking. Somebody is doing those appraisals and it ain't me.