A Center for Public Integrity investigation of the appraisal industry in California and Florida, two of the states hardest hit by foreclosures, found that since 2005, one in six appraisers whose licenses were revoked or surrendered kept their real estate sales or broker’s licenses. The violations that led to these appraisers losing their licenses ranged from simple incompetence to fraud committed for personal financial interest. Yet they slipped through the cracks of a loosely maintained system of state oversight, which allowed them to continue working in the real estate industry negotiating sales to home buyers, who likely know little about their pasts.
Industry insiders believe the number of these former appraisers still in real estate is in the hundreds nationwide, but an accurate figure is elusive given the patchwork of agency oversight. “There’s a lot more that you are never going to find,” said Pamela Crowley, who runs the website Mortgage Fraud Watch List. “Those of us who have been active in trying to police our own have come to the conclusion that our policing agencies don’t want that.”
In several cases, banned appraisers also remained in the appraisal industry, taking high-level positions in appraisal management companies, the increasingly prevalent and often unregulated third-party companies that link lenders with independent appraisers.
California and Florida authorities concede they dropped the ball: in most cases, they say, a violation serious enough to lead to an appraisal license revocation should also result in a lost realtor’s license. Yet the dual-licensing bureaucracies did not always exchange violation information. And when they do, the process of taking a license is not automatic — violations against each license must be investigated independently.