-- Have the real estate valuation shenanigans and inflated home appraisals that characterized the boom years disappeared from the marketplace?
Are mortgage loan officers and realty agents -- even individual home sellers -- continuing to influence or attempting to interfere with appraisals despite new federal rules that ban such behavior?
Ask appraisers and many will tell you: It's still business as usual. Attempts at encouraging inflated appraisals continue to be commonplace, though in some cases the techniques have become subtler.
"Absolutely, appraisers continue to get pressured" to hit the numbers needed to push transactions to closing, said Bill Garber, government affairs director for the Appraisal Institute, the country's largest professional organization representing appraisers.
"That has not changed yet," Garber added, even though recently signed federal housing legislation toughened appraisal standards and the Federal Reserve's new truth-in-lending rules ban interference, bribes or intimidation designed to influence appraisers' valuations. The most recent national poll of appraisers, conducted by October Research Corp. two years ago, found that 90% of those interviewed reported some form of interference or intimidation by retail loan officers, brokers and third-party appraisal management firms, among others.
Gary Crabtree, principal of Affiliated Appraisers in Bakersfield, said, "It hasn't gone away," and some developments on the horizon could make things worse. Starting Oct. 1, a federal foreclosure-relief refinancing program gets underway that will require lenders to write down the value of distressed houses to 90% of current market value to enable borrowers to be refinanced.
Some appraisers "could find themselves under pressure to inflate values" on those properties to cut lenders' losses, Crabtree said, even though the law authorizing the program specifically prohibits interference.
Sara F. Schwarzentraub, president of Inter-State Appraisal Service of La Mesa, Calif., recalled how one client left a recorded message on her office phone complaining that "if you didn't know you [could] hit what was needed, you shouldn't have taken the assignment." The number needed by the caller -- a mortgage company employee -- was $50,000 to $60,000 higher than current comparable values in the area could support, Schwarzentraub said.
In Owings, Md., Michael Tsourounis, president of Calvert Appraisal and Realty Services, recounted a recent experience when he visited a mortgage company in his area. Tsourounis inquired about the possibility of doing appraisal work for the lender.
"The office manager asked me directly: 'If I sent you out to appraise a million-dollar home and the comps [comparable values] only came in at $800,000 . . . but in your heart you knew it was worth a million dollars, what would you bring it in at?' "
Tsourounis said he told the manager that "the market is full of million-dollar houses selling for $750,000. Why should I be responsible for adding one more foreclosed property to the already growing list?"
"Not surprisingly," he said, he's never heard back from the lender or received an appraisal assignment. "Was that a form of interference? You bet it was," Tsourounis said. "It was just a little subtler, a little less direct, than it used to be."
The obvious intent here, said Frank Gregoire, immediate past chairman of the Florida Real Estate Appraisal Board and an appraiser in the St. Petersburg-Tampa area, "is really to find out: Will this guy play ball? Will he be cooperative when we need him?"