Credit Counselor: Appraisal Fraud Can Come Back to Haunt Lenders.(Senate investigation)(Brief Article)

Today, it's the rare legislative mortgage bill that doesn't have at least a few clauses stating that a lender or broker is prohibited from giving false information and pressuring a borrower into doing something that might not be in their best interest.

Recently, these bills are also now including clauses stating that a lender or broker may not bribe or coerce an appraiser to influence their value judgement on a real estate property.

In mid-August, Brian A. Glanville, president of the Washington-based Appraisal Institute, submitted testimony on the issue of appraisal fraud to Sen. Paul Sarbanes, D-Md., chairman of the Senate Committee on Banking, Housing and Urban Affairs.

In his testimony, Mr. Glanville said that "unqualified individuals are now performing a large portion of the real estate valuation work throughout the country in the form of 'evaluations,' broker price opinions and through competitive market analysis reports.

"In many cases, evaluations are done by the staff of organizations that have a vested interest in the real estate transactions. We think this practice negates the benefit of having an independent third party involved in the real estate transaction."

In agreement is Michael Andreas, the associate director the National Association of the Real Estate Appraisers and the National Association of Review Appraisers & Mortgage Underwriters, both based in Alexandria, Minn.

"It is a conflict of interest and one of the most argued complaints from some of our members," Mr. Andreas told this publication.