Appraisal Fraud
You might want to read this article. Notice what it says about an AMC allegedly ‘influencing’ appraisers to report incorrect or high values in disregard to federal law about appraiser independence.
This brings up a salient point:
When AMCs hire and employ W-2 “staff appraisers“, is there a potential for AMCs to direct appraisal value outcomes based on how reports are reviewed and suggested ‘better’ comps provided as a requested correction to a submitted report?
But to be fair, this can also happen with lender-based internal appraisal servicing departments, which my first-hand experience proves.
It seems that no matter how we slice and dice this aspect, there can be covert and sometimes apparent attempts to influence property values – typically upward.
Steven L. Garcia, a 45-year-old Schaumburg resident, and his 43-year-old brother, Michael R. Garcia of Streamwood, operated American Financial Mortgage Services Inc., a Schaumburg-based licensed mortgage brokerage, according to the U.S. attorney’s office.
The duo fraudulently caused lenders to make mortgage loans brokered by their company by falsely representing that the supporting property appraisals were performed by independent appraisers, the U.S. attorney’s office said. Instead, the brothers and their employees were selecting and paying the appraisers, managing the appraisal process and influencing property valuation.
Mortgage brokers are prohibited by Federal Housing Administration regulations from having substantive communications with appraisers about property valuations, according to the U.S. attorney’s office. The regulations also prohibit mortgage brokers from ordering or managing and appraisal assignment and paying appraisers.
The Garcia brothers allegedly bypassed these regulations by controlling Residential Appraisal Management Company Inc. through a nominee, according to the U.S. attorney’s office. They used the company to steer appraisals to hand-picked appraisers.
One of the hand-picked appraisers was a relative who gave an appraised value sufficient to support a proposed loan, while falsely representing to lenders that Residential Appraisal Management Company Inc. selected appraisers based on experience and skill, the U.S. attorney’s office said.<
Dave Towne on e-AppraisersDirectory.com
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Yes, the “suggested sales to consider” they send are invariably higher than the subject value, I consider it steering. Like a suggested sale being on lake front while the subject is rural county road, entirely different market area. And, the parties pulling the “sales” are obviously not geographically competent, (probably not competent at all) and likely unlicensed. Welcome to the world of Zillow and Corelogic.
It was not very long ago that many interested groups and regulatory persons were arguing in favor of additional appraisals sourced from separate avenues to be a new standard to prevent this very sort of fraud and abuse. I’ve seen several of these stories come through over the years and most if not all of these violations would have been far less likely to occur if the checks and balances systems were stronger rather than weaker. This abuse happened because of lack of effective and necessarily redundant checks and balances. Can you imagine how greatly the instances of fraud could have been exponentialized if valuation service was in the hands of a limited few parties like tech giants and lenders own avm’s? Imagine this fraudster team or even a more sophisticated larger company effort utilizing similar methods, using evals and avm’s, utilizing the waiver program, avoiding the requirement to source a human appraiser all together, they could have done far greater damage.
and here comes Round Two
I want to puke everytime I even read the word Corelogic. And CU/FNMA is no different, why they even send supposed comps to review is beyond me. The few times I got some for review they were all worthless.
Listen up people: We are not computers! They can have all the big data, the advocates for high values and the AMC model, and expect us to be as fast as a computer. If we don’t do our work, verify, and develop a gut feel, all the numbers crunching we learned won’t prove any value because it is an opinion! People who are new or not licenced don’t know this is part art and part science. They don’t have this ability, so unless you allow some AMC to use your license, E & O, continuing education, experience, and good judgement, no matter how many big programs they have, they don’t have analytical skills.  Why is that? I argue with guys who couldn’t appraise and think I should buy a regressional analysis tool they invented to help me develop an opinion; I tell them when robots start buying houses I will use a regression for residential appraisal.  It is the woman (in most cases) that decides (within the family budget) which house the family lives in. That may strike you as sexist, but it is true. The wife wants a home for her children; she asks hubby how much can they spend; they figure $xxx,xxx. She shops and they look; she walks into one house it feels right. For me it was a house that had a large dining room; I imagined my whole Sicilian family in this dining room for Thanksgiving. It had a fireplace which was cozy. Enough bedrooms; right school district for my kids, close enough for hubbie’s work commute. I have worked at home for 33 years, so I wanted to be close to the kids’ schools, close enough to have my appraisal practice and close to bus lines for the nannies. If both parents work then the commute time is probably more important than my reasons for making a certain choice, but what I want to emphasize here is: Computers don’t have any ethics. Computers can’t see if one house in the same tract is remodeled; we look at the photos of the interior and exterior of our comps. We measure our subject or have an authoritative, accurate floorplan or sf provided by the county assessor or we have to measure it. We can’t depend on what a realtor (interested party) said in a listing to be accurate! They lie all the time! If you want an honest appraisal, be thorough and remember we are practicing a form of Behavioral Economics. Learn what that is…. Computers used for valuation purposes are NOT RELIABLE because they have fake facts designed to sell the property, so they don’t care about the buyer because the seller pays their commission. Remember, if you do your work properly, hold your integrity like it is a lifeline, and conduct yourself as a professional appraiser, you will prevail in most debates about your opinion. Working for clerks who want to manipulate our work doesn’t have to be torture; tell them when you get the list of “supplemental” comps, give them five minutes and write one line on each comp about why it isn’t used in your report. (too small, too dated, lot too large, location not in the neighborhood, etc) They have no right to practice scope creep or to doubt your opinion, unless you do sloppy work; tell them to get a licensed appraiser to review your work and that when that person calls or contacts you that you will be glad to spend a few minutes talking about your value, appraiser to appraiser. period. if they don’t like that, tell them to take you off the list as you have no intention of working for them. We don’t even know how much they are getting to act as our “pimp”! Once I had six people to answer to because they had a rotating panel of AMC clerks, none of whom were licensed or experienced; I considered this harrassment, so I told them to take me off the list as I don’t need six babysitters or “bosses” to prod me like cattle. If that doesn’t work and they keep sending you email “blasts” searching for the cheapest appraiser and you choose to work for them anyway, then I don’t have any sympathy for you, and I won’t waste my breath trying to get through to you. You are an independent contractor, not an employee, so act like you own your own business!
Now that’s a great non political statement that I can endorse. Behavioral economics. We’re not forecasting, we’re analyzing with human logic. I value things. That’s what I do. To date I have found very little value for automatic programs. Logical inference is much more effective and meaningful than regression. Pairing, extracting, often a waste of time. In the real world that deck costs 5 grand, the carpets cost another 5, the roof was free via compulsory insurance, and I know you got a hella deal on that imitation flooring at the big box store. Nice custom fan and lights though, those look hard to source. I don’t need to pair anything to develop meaningful adjustments and value relationships to compare a home with, to a home without. I stopped being impressed with tech wizardry a long time ago. These appraisal assignment auto programs have as well turned out to be nothing more than a clever way to allow non qualified people to participate in what was traditionally a strictly regulated qualified persons only process. If people want to pick up their appraisal game they need to swing by the hardware store more often and understand how to build a home. You would not ask a person on a bicycle to value your fine automobile, neither should people expect the tech guy in the cubicle with no direct real estate sales brokerage or appraisal valuation experience to understand how the detailed relationships of labor and construction practice play out in relation to value in the open real estate market. You can’t figure it out from only sitting on a computer, it’s simply not possible. Price is not the same as value. And a software tech master is not the same as a qualified appraiser who understands how to build a home. Facts of life.
Anyone remember that eAppraiseIt was a FIRST AMERICAN company?
The inventors of PACE PRO. The guys that bought ACI
The guys that wanted to be merged with CoreLogic.
“Monopoly” I don’t see any monopoly here.
Ironic to me is that First American is who Quomo sued and what started the HVCC in the first place. Are Corelogic and First Am still merged or did they do some kind of “split”? I had never heard of PACE PRO, so I just read this article from this site from 2016 http://appraisersblogs.com/first-american-pace-pro-improprieties. Yikes! Anymore I ask AMC’s what is their parent company before I accept an order from them. Rels, Landsafe, FNC, DataQuick, M&Swift, Source One, Reverse Mortgage, Old Republic, who/what is the parent company?
My understanding is that they were required to officially split
Glad you read about PACE PRO… that is the model for nearly all hybrids as near as I can tell. Im hoping all appraisers will get screen shots of the online or cloud forms these clowns are using. Just accept one single order – complete it to the point where it become non USPAP compliant then return it to them with comments that “it has just become clear that the clients specific requirements are not in compliance with USPAP despite representations to the contrary, and I am returning this order to you.”
Then we post all the forms here. Even ACI and alamode are making hybrid forms for customers & appraisers who are being falsely told they are USPAP compliant.
Mike, You a right. First American purchased Forthsthe Appraisal. As an appraisal Management Company, they no longer send orders to one man shops like me in my area, but send everything to their subsidiary company to maximize profit. AMC’s are absolute frauds acting in their own best interests. I want to quit appraising and start up an AMC so I can funnel all the work to my own appraisal company. That’s just what Dodd-Frank had in mind!Â
I think it would be appropriate to file a complaint with the lenders regulators. They have eliminated the required firewall and they now effectively DO have the loan officers selecting the appraisers.
If you think that during the trump de-regulatory climate where they are telling the Department of Interior employees a list of words they can’t use that you are going to get any co-operation from regulators you need to relook at your comment. They pretend they are de-regulating when they are “deconstructing the administrative state”, thanks to bannon and trump, and all their ditto-head republicans are going along with it so they get their tax break, promised to the donors like Koch; if you think trump or anyone in his administration is going to want honest appraisals, then you need to start looking at the Brooklyn Bridge. One of the reasons we had the Bush crash that affected the world is they were fostering corrupt policies carried out by FNMA and Freddie while the regulators were not enforcing anything that was already law. Now that President Obama fixed it and the economy is better, they want to add to the deficit, then they can say when things go bad they have to cut medicaid and medicare. They still spend about 57% of the budget for defense, so they have created a big deal that some people are on food stamps, that is less than 1% of the budget but they make those poor people without work or ability to look like they are the reason we aren’t prospering. We aren’t going to get more job from corporations because the bulk of their profits go to the shareholders, beefing up the stock market so some jerks can sell short and screw the world for their unlimited greed. I am glad I am going to retire because a bunch of greedy bastards ruined our profession and continue to profit off us, our licenses, and growing expenses, while competing for short turn-around times with computers that give out bs numbers, but we are people, so we can be sued, lose our license and the few dollars we can get from an appraisal because some jerks who know nothing about appraisal or ethics are calling the shots; all this legislation is written by lobbyists, and the banks and realtors want us out of the picture so they can rape the banks and get another bailout. Does anyone see a pattern?
Wow.
Words like ‘pride of ownership’? Graffiti? Gang Area? Church? Temple? Synagogue? Christmas?
Word police have been around for a very long time. Rose, we just HAD 8 years of the other side. ALL appraisal problems from 2009 to present are pretty much owned by them. They had a chance with Dodd Frank and all we got were unenforceable C&R fees and unenforced A.I.R..
Maybe Trump will be all the things you fear. Maybe he wont. Id rather address the known problems rather than manufacturing new partisan ones.
Better lay off that kool aid stuff, it messes with your mind. Weaponized media is real. Your comment has nothing to do with the article at hand, stop ranting. “The government does not solve problems, it subsidizes them.” I think you’ve been watching too much of that fake news.
https://www.youtube.com/user/MarkDice/videos