Convicted for Committing Fraud Unknowingly?
Appraisers need to have intent in order to be convicted of fraud…
I have recently read several different posts and articles on the Internet stating that some appraisers have committed fraud unknowingly. Some describe instances of stating condition to be average when the property needed work, or “tweaking” the numbers to make the deal work.
First of all it is important to note, the FBI defines mortgage fraud as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan”. By that definition, such fraud can clearly be committed by both lenders and applicants, even though the latter may not think their misrepresentations or omissions are significant enough to be a concern.
This definition has been transmitted around the Internet and has been widely used to accuse appraisers of wrong doing. It is equally important to note that in order for a charge of gross misrepresentation to become a convict-able offense of fraud the claimant must prove that the defendant intentionally committed such a grievous transgression. Fraud by intentional omission is of course as bad as fraud by wording a report to mislead, or gearing a value towards a prearranged goal.
Appraisers must always be vigilant to make sure they have not compromised their objectivity or lost their independence during the appraisal process. Equally, review appraisers must stray from calling misstatement of that is uncovered during the appraisal review, “fraud”. Fraud is a term that the judge hands down with conviction. An appraiser is not guilty of committing fraud until he or she has been convicted of such an offense.
It is my considered opinion, that review appraisers who place in their reviews charges of appraisal fraud are setting themselves up for a libelous suit from the appraisers who are being labeled fraudulent appraisers by the client and as a result are losing business due to the label.
Is it possible to commit fraud unknowingly? No. The simple answer is no. The appraiser needs to have intent in order to be convicted of fraud. This is not to say an appraiser can not, or should not have his or her licensed removed if he or she shows a trend of producing appraisals that are materially incorrect or misleading, even if there was no intention of fraud. But this is another discussion for another day.
Pretty sound advice Uncle Zev. I have to confess I’ve been ‘guilty’ of the fraud accusation in the past. While a Philadelphia Lawyer may have the ability to parse it down to an egregious case of merely being incredibly stupid; there ARE instances when its exceedingly difficult to call it anything BUT fraud. Rare, but it happens.
In recent years I’ve taken a different approach wherever possible. I am NOT reviewing an appraiser or even an appraisers work. I AM reviewing a written appraisal. By keeping that foremost in my mind it helps to keep ME from becoming guilty of unsupported subjective opinions about the quality of another’s work. I know, I’m quibbling, but I really want my own focus to be purely on the appraisal being reviewed and not the “work product” of another appraiser.
Where circumstances ‘suggest; even strongly, that ‘fraud’ is or may be present we should all limit ourselves to just stating the facts affecting the property. Thanks for the reminder!