Sentencing Guidelines Proposal
Proposed Amendments to the Sentencing Guidelines
Speaking at a March 14 hearing in Washington, D.C., the Appraisal Institute urged a federal judicial agency to require the use of real estate appraisals when calculating loss in mortgage fraud cases.
In prepared written testimony, Appraisal Institute President Sara W. Stephens, MAI, told the U.S. Sentencing Commission,
“We believe the Commission should adopt a special rule for determining the fair market value of real property if the mortgaged property has not been disposed of by the time of the sentencing. However, this rule should require use of real estate appraisals prepared by qualified appraisers in accordance with the Uniform Standards of Professional Appraisal Practice, as opposed to tax assessments, to ensure fairness and consistency.”
Stephens said the Appraisal Institute and the American Society of Farm Managers and Rural Appraisers oppose the proposed amendments to the federal Mortgage Fraud Sentencing Guidelines because the amendments propose using tax assessments, and not real estate appraisals, to determine fair market value when the property in question has not been sold.
She said that condition and quality inspections are necessary as part of a credible and thorough valuation of a property, noting that tax assessments do not include such inspections. She also said tax assessments rely on public records data, which can be inaccurate and therefore reduce the reliability of the valuation.
Stephens also noted that reassessment periods vary widely by jurisdiction, and that some jurisdictions have not reassessed property in several decades, adding that fairness requires use of a real estate appraisal.
She also said that assessed value may not conform to market value. And she said the two appraisal organizations recommend that the Commission establish a special rule relating to the qualifications of real estate appraisers.
Section 1079A of the Dodd-Frank Act requires the U.S. Sentencing Commission to review and, if appropriate, to amend the federal sentencing guidelines applicable to mortgage fraud and financial institution fraud offenses and to consider whether the guidelines appropriately account for the potential and actual harm to the public and the financial markets from those offenses.
Click here to read Stephens’ full testimony.