Our appraisal firm tends to stay away from wholesale lending other than clients who pay their invoices and do not pressure us. Mortgage brokers tend to hook in with specific appraisal firms that make the deal, especially on cash out refi’s. We are not one of those firms. As a result, lenders tend to gravitate to us to perform desk and field reviews.

Here’s a typical scenario that happened today:

We are asked to review a report for a national lender who like many lenders, has better control over the quality of their retail channel appraisers than their wholesale channel appraisers. High volume mortgage brokers are often able to muscle “their appraiser” in by flooding the lender with high loan volume for short bursts.

The report we reviewed was a condo unit and relevant sales in the building were excluded and adjustments for amenities such as expansive views of the comparables were ignored. The appraiser gridded a listing as the first comparable that had been on the market for 6 months with no activity and yet the estimated market value was much higher than this sale. The other sales used were not comparable. The sales used had significantly superior views or locations and they were as much as 50% larger with token adjustments for square footage differences.

The result?

The estimated market value was overstated by about $2,000,000! Now I’d like to point out that this lender gives us a hard time about not measuring up to their turn time standards. Guess what? This appraisal firm can get the reports in faster than we can.

A while back, I reviewed an appraisal by this same firm that was about $9,000,000 over valued. The report had been shopped around to several lenders.

Lenders and appraisers that see this type of activity have little recourse in our state. We have to disclose our name in public and therefore would be subject to retaliation.

When is Congress, the secondary mortgage market and financial institutions going to figure this out? The end is near and good appraisers will be ready.

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2 Responses to “Mortgage Fraud: Reviewing Appraisals Inflated By Millions [part 7 of a series]”

  1. Annemieke says:

    Lender pressure is considerable and so are inflated appraisal reports. As review appraisers we send blatantly bad reports to the state.

    The lending industry should not be surprized that more and more experienced and good appraisers are leaving the mortgage lending appraisal business and going towards other appraisal business. And all there will be left for the lenders are the inexperienced appraisers and the Skippies. Bad news for the homeowner/buyer, especially in rural areas.

    The ultimate losers will be those homeowners who are upside down in their mortgage due to inflated appraisals.

  2. terri says:

    i recently walked away from a condo that i was trying to purchase because the 2nd appraisal (from another company)was 6,000$ less than the appraisal from the 1st company on the same property.i was doing a no money down with the seller paying the closing costs.i lost 750.00 on this mess.what can i do in order to make these people aware that i know what they did?