Appraiser Engaged in Mortgage Fraud Remains Licensed with BREA

Brian L. Trotrier

Brian L. Trotrier

Executive Vice President and Chief Operating Officer at FREA
A former practicing attorney with more than 30 years experience in real estate and risk management. The Foundation of Real Estate Associates (FREA) has specialized in providing Errors & Omissions Insurance to appraisers and home inspectors since 1993. As a membership organization with over 6,000 members, FREA is one of the largest and most well respected professional associations in the country, providing E&O Insurance for appraisers and inspectors as well as educational opportunities, member benefits, and legal support.
Brian L. Trotrier

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Appraiser Engaged in Mortgage Fraud Remains Licensed with California BREA

The Inmates Must Be In Charge of This Asylum

The California Bureau of Real Estate Appraisers is sadly yet another example of a state agency that does not really understand what the taxpayers expect of it. The taxpayers probably assume the agency in charge of licensing appraisers in California would certainly not renew the license of an appraiser who not only is indicted in a multiparty, multi-million dollar mortgage fraud case, but actually pled guilty to at least one count of the crime. Unfortunately, that assumption would be incorrect. The following is a summary of the case in question. We have changed the names of the parties to protect the innocent though we find it difficult to label anyone involved as “innocent”.

In August of 2011, the US Attorney filed criminal charges (based on an indictment issued by a federal grand jury) against 26 individuals involved in alleged wire fraud in a mortgage lending scheme relating to numerous loan transactions in 2006 and 2007. Some of the allegations involved one or more real estate appraisers then licensed by the State of California. Sometime in 2012 the San Diego Union Tribune reported that 5 of the original defendants pled guilty to one or more of the charges, including one of the appraisers. In that article the Union Tribune referred to a section of the indictment which referenced an email from the appraiser in question where the appraiser offered to push the value higher in an appraisal if necessary to make a deal work. The appraiser in question technically pled guilty to making false statements about his income and assets when applying for a loan (or loans) in his own name as part of the alleged scheme to defraud several lenders.

Since we place E&O insurance for real estate appraisers in the State of California, we looked up the appraiser in question and discovered he had purchased his E&O insurance through our company. Immediately we notified the insurance carrier what we had learned and then looked up the individual’s license status with the BREA. Surprisingly, we learned that not only was the appraiser still licensed, his license was shown as being in good standing with no investigative or disciplinary proceedings against him. In fact, we learned his license had actually been renewed once by the BREA while he was already under indictment and possibly after his guilty plea was announced. We next called the BREA and inquired how someone involved in mortgage fraud could have an appraisal license renewed and we learned that license renewal is basically a ministerial act which requires the licensee to have an active license in good standing, be current on all required CE, and pay a renewal fee. Apparently, the license renewal process does not require a license holder seeking renewal to answer any questions relating to activities which might relate directly to their competency to continue to hold a license. According to the BREA a separate disciplinary action is commenced after the license renewal at which time appropriate action is taken. It seems to us that taking the action at renewal is both more efficient and logical, but we are dealing with a state agency here. At this time, we sent the BREA a copy of the Union Tribune article putting the BREA on notice of the indictment and guilty plea.

After we notified the BREA of the appraiser’s guilty plea in 2012, we never gave the matter another thought. Recently when the guilty plea of another appraiser charged in the same case was announced we checked to see if this second appraiser’s insurance was placed by our company. Once again, we learned it was and again we notified the carrier in question. We also checked the BREA website and found this appraiser’s license history contained a record of disciplinary action taken by the BREA. Then, purely out of curiosity, we decided to check the first appraiser’s license record to see what action the BREA ultimately took after we notified the BREA of the guilty plea in 2012. Imagine our surprise when we learned that his license had been renewed again in 2014 and his disciplinary file contained nothing about the guilty plea. After exchanging email with the BREA staff, we filed a public records act request seeking additional information. When the response arrived we were astonished by the documentation enclosed. It showed the appraiser in question received a slap on the wrist (aka a citation) which doesn’t even go into his state license records. All he had to do to retain and renew his license again was to pay a $1000 fine. We subsequently learned he has in fact renewed his license again for 2016.

Not being satisfied with this outcome, we submitted a second public records act request and this time we asked for any and all information obtained from any source and used by the BREA in making its determination not to even note this matter in the appraiser’s license file. We honestly were hoping there was something in the BREA file from the US Attorney’s office offering mitigating circumstances or some tangible reason why this appraiser got off with less on his record than many appraisers the BREA “investigated” between 2008 and 2015 as a result of the real estate downturn. Many of those appraisers were ordered to pay large fines, do extra CE classes, and were placed on probation or had their licenses suspended for some period of time. In other words, we wanted to know why the BREA was not sinking its teeth into this appraiser the same way it had gone after so many appraisers who allegedly may have used a bad comparable sale in an appraisal even if the allegedly bad comp did not change the conclusion of value.

Sadly, when the response to this request came back to us from legal counsel for the BREA, it recited a number of exceptions to the government code section concerning public records act requests and BREA declined to produce anything at all. Among the exceptions cited was a reference to a section excepting records from state or local agencies involved in investigatory matters, including law enforcement agencies. During a subsequent conversation with the attorney in question, we asked why this exception applied to federal agencies since the statute only referenced state and local agencies. His reply was that in spite of wording to the contrary the exception included all investigative information no matter what the source. Upon realizing this discussion was going nowhere fast, we informed the attorney we planned to:

  1. write this article/blog to spread the word far and wide by posting it anywhere and everywhere appraisers, mortgage bankers, and consumers might be found,
  2. send a copy to the Governor’s office so his staff can follow up with the BREA about why this appraiser still has a license,
  3. send copies to every newspaper or journal that ever covered appraiser issues,
  4. send a copy to the Appraisal Subcommittee and the Appraisal Foundation so they are aware how the BREA handles appraiser disciplinary matters in California,
  5. send a copy to Senator Hueso’s office since we previously asked that office to look into the severe and career damaging disciplinary actions given to appraisers in 2008-14 for what we saw as minor issues (at least none of them pled guilty of a federal crime), and
  6. send a copy to Speaker Atkins office so she is aware the BREA thinks it is OK to issue appraisal licenses to California appraisers involved in mortgage fraud.

We find it totally inconceivable the BREA thinks it is acceptable to let an appraiser who engaged in mortgage fraud remain licensed and in good standing with nothing of record to alert lenders or consumers before they hire this appraiser to do an appraisal.

We invite you to join us and sound off and let the world know how you feel about the action or should we say inaction of the BREA in this matter. We say enough is enough and it’s time the people who are supposed to protect the residents and businesses of this state do their jobs the right way.

Call the BREA 916-552-9000.
Email Governor Brown.
Email the Appraisal Subcommittee.
Email the Appraisal Foundation.
Email Senator Hueso or call 916-651-4040.
Email Speaker Atkins or call 916-319-7722.

Image credit flickr - Russ Sanderlin
Brian L. Trotrier

Brian L. Trotrier

A former practicing attorney with more than 30 years experience in real estate and risk management. The Foundation of Real Estate Associates (FREA) has specialized in providing Errors & Omissions Insurance to appraisers and home inspectors since 1993. As a membership organization with over 6,000 members, FREA is one of the largest and most well respected professional associations in the country, providing E&O Insurance for appraisers and inspectors as well as educational opportunities, member benefits, and legal support.

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15 Responses

  1. Bill Johnson says:

    It seems to me the author and the E & O insurance company are upset that they ultimately provided coverage to someone who broke the law and thus had increased liability risk. But I ask the following. Do the banks gets their licensees to operate pulled after they commit a crime? Is the appraiser just expected to work for these criminal clients so the industry doesn’t implode on itself? Do these lenders who are asking me to be their client have to in advance provide me with information as it relates to settlements / lawsuits? I wish the public, regulators, and this E & O insurance company would go after the real criminals (banks). If FREA is providing coverage to a risky pool of appraisers, this may explain why they tired to bump my E&O from $795 to over $1,200 while I have never had a claim.

     

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  2. Danny says:

    FREA isn’t an insurance carrier, they are a broker. Well their sister company is a broker, ALIA. They have no control over rates. Rates go up because claims go up, not because FREA/ALIA is trying to make more money. They also aren’t the one’s who pay out a claim, again the insurance carrier does. An example of this is say someone goes to FREA/ALIA to get an insurance policy. ALIA shops the market with multiple insurance carriers. They place your business with the carrier who meets your needs the best that you have final say on, so let’s say that is AIG. Government guidelines are in place so that ALIA/FREA can’t raise the premium that AIG quotes to profit on. So all they do is pass that amount on to you. When you get in trouble and a claim comes against you, the carrier (AIG) of the policy that you picked pays it. ALIA/FREA doesn’t lose any money. The point of the article is when you are a licensed professional and you commit fraud within your industry you should lose your license and/or be punished based on the severity of your crime. Same works for anything else in life you have a license for. Your driver’s license go drive drunk and break the law, you’ll lose that license to drive, it’s that simple.

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  3. Koma says:

    Apples and Alligators using drunk driving as a comparison. Have you EVER lost a loved one to drunk driving? I’m guessing not due to the fact your being so flippant about it. No one cares about the semantics whether or not who’s the insurance company. The main fact is if this appraiser was the lender he’d pay a fine and be on his way (like what happened to all of them since ’09), but because he is not you want us to bury him alive. Why don’t you take care of your own “assets” and leave us out of this. I’ll be waiting for the response…this effects us all…blah…blah…blah..

    …the piling on continues…

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    • Danny says:

      Bill cares about the E&O company as he brought it up. Ok let’s not compare drunk drivers then. Let’s compare it to a stock broker who commits securities fraud in order to make money. He not only will lose his license, he will have to pay high fines and face possible jail time. Yet for the appraiser who commits fraud it is fine? Maybe there are more appraisers committing fraud then one would imagine with the amount of support given to this case. This is a right vs wrong. You have a duty to perform a job to a professional standard, when you take advantage of that trust you are a criminal. What if your doctor who you trusted was giving you a false diagnosis in order to make additional money. And you find out he screwed you over. You would be, oh that’s fine doc. You are a good guy in my book, keep your license and I’ll keep paying you my money. No, you will be livid. It is all one in the same. This is not a case against the profession of appraisers this is against the individual, a bad appraiser who took advantage of his position.

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  4. bubba jay / Retired Appraiser II bubba jay / Retired Appraiser II says:

    scary to think that the lives of many appraisers have been ruined by far, far less.

    and yet, some people continue to dare ask WHY hardly anyone wants any part of this BS anymore?

    the corruption, and bleeding continues . . . . .

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  5. I’ll reply since I am the author. The issue is not insurance cost and certainly not our profits since I donate hours of my time to defending the appraisal profession at no cost. I also agree the drunk driving analogy is a bit of a stretch. The real issue is that the BREA (like many other state agencies) climbed all over appraisers from 2008 until recently for what were very minor and insignificant (no impact on value) issues. They investigates them, fined them, ordered hours of CE, and in doing so hurt their business. This caused numerous good appraisers to have a black mark on their records that was, in my opinion, totally unjustified. One can only assume the state agencies wanted to make a lot of noise about “fixing” the problem much the the federal government did, all while leaving the real source of the problem alone (the lenders) because it was not politically expedient to take on one of the biggest lobbying groups in the world. Now, when an appraiser actually does something deserving of punishment, the state agency involved suddenly (and without any reasonable explanation) gets “soft on crime”. This is why I cried “foul” and wrote the article.

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    • Brian, You and I have written privately (in disagreement) with each other via email on this article. I can empathize with the conclusion you cite above about BREA appearing suddenly soft on crime versus past overkill for relatively minor offenses.

      My issue is that you appear to have carefully parsed your reporting to make it appear that the appraiser was part of some kind of giant conspiracy and only got a wrist slap- $1,000 fine and non public censure, so now FREA (via yourself) is going to ‘get him’.

      California BREA was and still is among the tougher state enforcement agencies across the country. Its rare that they fine LESS than $5,000 for even relatively minor USPAP non compliance issues NOW. They have not ‘gone soft’.  WE do not have all the facts; and you have not reported them in a way that fills in the gaps.

      None here condone malfeasance by appraisers or anyone else. Having said that though, most of us are also not willing to jump on the “let’s lynch ’em!” bandwagon without having access to those teasing tidbits of missing information that fill in ALL the blanks as to why the punishment seems light for the ‘crime’ as you describe it.

      I know of appraisers from the same time period (work performed pre 2009) that DID lose their licenses and were fined heavily on top of that. Clearly OREA/BREA had valid reasons for a lower end of spectrum punishment.

      One of my functions with the Appraisers Guild [union] is to help appraisers to either defend themselves against false accusations; or to mitigate damage arising from actual appraisal deficiencies that do NOT involve impaired integrity. Our focus is to educate them so that they do not make the same mistakes twice; AND so that they avoid any others in the future that may be apparent from their past work.

      Accusing BREA or it’s investigators of ‘going soft’ is not the best way to convince them to focus more toward remedial actions, than purely punitive ones.

      I think if you reread your own article as well as your private email to me, you will see the articles thrust is toward vindictiveness rather than curing any pressing widespread issues that are major concerns to most appraisers.

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  6. bill johnson says:

    Mike, I agree, I do not have enough information to judge the penalty. The article states “he offered to push the value higher in an appraisal if necessary to make a deal work”. Did he actually push value? Was the appraisal penalty/fine based on just the offer to push value? The article also states he “technically pled guilty to making false statements about his income and assets when applying for a loan (or loans) in his own name as part of the alleged scheme to defraud several lenders”. What does technically pled guilty mean? If he is lying about his income to buy property, did or should BREA take this into account when giving out a punishment as it relates to his appraiser license? Is that a personal matter that speaks to his morality? Is morality a judgeable characteristic that is measurable at license renewal time? If someone drives under the influence of alcohol and gets into an accident causing bodily harm, is this a personal matter or can this be considered by BREA at renewal time. Its a slippery slope. In the future with required background checks will he simply be found out and unemployable anyway? I disagree with the title as it came across my e-mail box “Appraiser pleads guilty to Mortgage Fraud, gets to keep license” as there are not enough facts to understand exactly what happened.

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  7. bill johnson says:

    As I’m on the direct e-mail list from FREA the title came across my personal e-mail and I would assume ever other subscriber as I have indicated “Appraiser pleads guilty to Mortgage Fraud, gets to keep license”. The title as used on this site for what I believe is the exact same article, is different than what many were exposed to by way of direct e-mail. Thanks.

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  8. Jeremy Hall - Colorado Jeremy Hall - Colorado says:

    There is no logical counter argument to this issue.  Crime is crime, and criminals should not be trusted with the duties of an appraiser.  If a person will lie or be unethical about one thing, they’ll certainly lie and be unethical about another.  Law has lost it’s focus, if it disregards the basic cornerstone of law, which is ethics and morality.  We cannot have law, in an immoral society, and it’s apparent the government agencies of so many variances, have ceased to make judgements based on moral grounds.  When injustice becomes law, resistance becomes duty.  Keep at them Brian, you’re doing a great job.

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    • Koma says:

      Already states they don’t have all the facts, but that’s OK You and Brian can bury him alive… Crime is a crime and criminals should not be trusted with the duties of a LENDER. Take a look at history, this is not the first time banks get away with it and won’t be the last. I’m not advocating doing something illegal, but a person with money that lawyer gets to define what’s illegal and the appraiser gets buried alive. Let’s let the state agencies do their job and stop arm chairing judgement against a fellow appraiser.

      …the piling on continues…

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