Appraisal Scoop

Will the new UAD appraisal standards result in lower mortgage rates?

According to Peter G. Miller's 9/6/2011 HSH Blog article, "New appraisal standards to impact mortgage rates", the answer is YES!

Mr. Miller says, "They may allow us to unearth faked, falsified and incompetent appraisals and thus prevent loan fraud, illegal flipping and bad mortgage investing. And such improvements in the valuation process might actually lead to lower mortgage rates by removing excess risk from the marketplace."

 

He feels that illegal flipping and "faked appraisals" were key factors in the mortage meltdown and that, "Tighter appraisal standards [will] make it easier to catch cheats and, also, to drive bad appraisers and lenders out of business."

He concludes that "the new appraisal standards will allow lenders and government officials to quickly review past appraisals to see if they conform to national standards. If yes, fine. If not, lenders are likely to provide less business (or no business) to the appraiser with the bad rep."

Fewer cheats ------> Reduced lender risk  -----> Lower mortage rates?

What do YOU think? 

• Do you think that appraisers and flipping were the cause of the mess that we're in? 
• Will the UAD actually prevent bad mortgage investing? 
• Will improvements in the valuation process really lower mortgage rate?  

Source:  http://www.blog.hsh.com - article   [Thanks to Bill Cobb for posting this article to his FB page Real Estate Appraiser Tips]

FDIC Sues LPS and CoreLogic Over Appraisal Fraud

From The Subprime Shakeout Blog:

In another sign that the Federal Government is turning its focus towards prosecuting the securitization players who may have contributed to the Mortgage Crisis, the FDIC filed separate lawsuits against LSI Appraisal (available here) and CoreLogic (available here) earlier this month. 

In the suits, both filed in the Central District of California, the FDIC, as Receiver for Washington Mutual Bank (“WAMU”), accuses vendors with whom WAMU contracted to provide appraisal services with gross negligence, breach of reps and warranties, and other breaches of contract for providing defective and/or inflated appraisals. 

The FDIC seeks at least $154 million from LSI (and its parent companies, including Lender Processing Services and Fidelity, based on alter ego liability) and at least $129 million from CoreLogic (and its parent companies, including First American Financial, based on alter ego liability).

Click Here to continue reading the full article from The Subprime Shakeout blog.

 And then there are those pesky Indemnification Clauses!  YES!  Apparently even LSI and CoreLogic have to sign them.

 

"Foreclosure-Gate Deal? Government agencies close ranks - Washington Post

Washington Post reporters Zachary A. Goldfarb and Dina ElBoghdady are working this morning on word that a compromise deal is near that would resolve accusations of fraud and chicanery in banks' handling of failed home mortgages and property repossessions.

Goldfarb and ElBoghdady report that while a number of disparate agencies have banded together in agreement, the Office for the Comptroller of the Currency--which oversees the banks--remains opposed to the direction of the deal. What's more, there's work to do on the final terms of the settlement.

They write, "Even as officials neared consensus over the changes they would require banks to make in foreclosure practices, there was still no decision about how large a penalty banks should face and whether they should pay a fine or devote the sum to helping rework mortgages for distressed borrowers. Officials have told banks they would like the industry to help avert 1.5 million new foreclosures, sources said." It's important this gets settled for the market to work on normalizing supply and demand.

Click here to read more.

Source: Washington Post & Builder Online

 

 

 

 

Homeowner’s Lawsuit Against Major Banks Progresses Slowly, Alleges Predatory Lending and Unfair and Deceptive Trade Practices by Wells Fargo and Others

Pelayo Duran Faces “David and Goliath” Battle In Potentially Precedent-Setting Case In Florida Court

Miami, FL (PRWEB) December 7, 2010  - Coral Gables, Fla. homeowner Pelayo Duran claims in his lawsuit that what he wanted was the attractive loan he saw advertised in the Miami Herald to refinance a home for his growing family. Instead, he ended up in the middle of an endless and costly legal fight with the nation’s largest banks accusing them of illegal predatory lending and unfair and deceptive trade practices.

According to the lawsuit, Duran saw an ad in the Miami Herald published by Wells Fargo Home Mortgage. The ad was offering an Adjustable Rate Mortgage (ARM) at a rate of 5.75%, with 10 years interest only payments, a fixed interest rate for 10 years, and a 5.1 annual percentage rate. Duran’s plan was to buy down the loan rate at closing 1 to 2 point and pay off the home in about 10 to 15 years.

The lawsuit states Duran contacted Wells Fargo because he had a longtime business relationship with the bank and the terms in the ad were the most favorable. Attorneys claims when Duran called Cindy Sierra who he thought was a bank representative, she first told him that the advertised rates were not available. She then told him that she would get him an even a better deal. Duran believes that he, just like millions of other Americans, was baited into applying for an attractive loan that never existed, only to be switched to a high-risk subprime loan.

According to the lawsuit, Sierra told Duran to leave the income section on the application blank until such time as she could conduct a “pencil search,” a prohibited but common practice used by mortgage brokers and lenders in order to maximize the loan amount in which a mortgage broker would shop for an appraiser to support the highest value that the lender could hit in originating the loan.

Initially, Sierra informed Duran that his home was worth $1.5 Million. The appraiser, Lee Rosenthal who worked for and was hired by Rels Valuation, (also Wells Fargo company), ultimately determined and represented to Duran that his home, which was purchased for $984,000 four months earlier, was now worth $1.2 million.

“Unbeknownst to me, she created my loan by adjusting the value of my home to my debt-to-income ratio,” said Duran. “They never considered my ability to repay the loan. All they cared about was the appraised value and my good credit score. What I also discovered was that a Wells Fargo representative was actually originating a loan for Greenpoint Mortgage Funding and that immediately upon the closing of my loan, Greenpoint would turn around and sell my loan right back to Wells Fargo as trust administrator for a pool of loan. In addition, Fred Schlang, SRA, an appraisal expert, later alleges that the bank’s appraisal was inappropriately inflated."

 According to the lawsuit, after haggling over the terms for several weeks, Duran and his wife were disheartened at the closing when the final Greenpoint loan agreement reflected a financed amount of $920,000 with an APR of 5.622% fixed during a five year period, with rate adjustments up to twice per year, a pre-payment penalty, and a rate cap of 10.5%, (not the 5% he had been previously offered in writing) and they would not be able to buy down the rate 1 to 2 percentage points at closing, as he had been previously promised.

Continue reading the FULL article

Cuomo’s Lawsuit Against First American Can Go Forward

By Karen Freifeld

June 8 (Bloomberg) -- New York can proceed with its lawsuit accusing First American Corp. of inflating home values under pressure from Washington Mutual Inc., a state appeals court ruled.

Neither federal law nor rules of the Office of Thrift Supervision bar the New York attorney general from suing First American and its eAppraiseIT unit, the appeals court in Manhattan said today.

EAppraiseIT gave in to demands for higher appraisals to secure more of Washington Mutual’s business, Attorney General Andrew M. Cuomo said when he sued in 2007. A First American spokesman disputed Cuomo’s allegation at the time. States including New York began investigations of the mortgage industry in 2007 as foreclosures rose nationwide.

via www.businessweek.com

You're All Wrong. Blame The APPRAISERS For The Mortgage Crisis

Author: Ned Bushong is a business broker and commercial real estate agent in Ohio. His website is www.bushongbusiness.com.

The following quotes have been snipped from the full article.

"For two years, person after person has told us who or what caused the mortgage crisis. The latest entry being a book by Michael Lewis and reported by Courtney Comstock, right here."

"Problem is, none of these really hit the bullseye. They've all missed the target."

"So, right here and now, I'm going to tell you who single-handedly caused the mortgage crisis: It was the appraisers."

"So, there's plenty of blame to go around. But only the appraisers had a fiduciary responsibility, a sworn duty, a legal obligation, to perform to the best of their ability. Given this information, you simply have to point your finger at them and say, "Right there is the main culprit in the crisis"."

Read more: http://www.businessinsider.com/youre-all-wrong-blame-the-appraisers-for-the-mortgage-crisis-2010-4##ixzz0kRFZTDjv

via www.businessinsider.com

Nationwide Mortgage Licensing System & Registry Launches a Consumer Access Database

From the Mortgage Fraud Blog - "The Nationwide Mortgage Licensing System & Registry (NMLS)- a mortgage licensing system operated by state financial regulators- launched NMLS Consumer Access. NMLS Consumer Access is a fully searchable website that allows the general public to view information concerning state-licensed mortgage companies, branches, and individuals currently licensed through NMLS."

NMLS Consumer Access^SM is a free service for consumers to confirm that the mortgage company or mortgage professional with whom they wish to conduct business is licensed in their state.

NMLS Consumer Access^SM

• Contains licensing/registration information on mortgage companies, branches and loan originator professionals licensed by state regulatory agencies participating in the Nationwide Mortgage Licensing System & Registry (NMLS).
• May not include all licensed/registered companies, branches or professionals. State agencies join NMLS in phases and not all agencies are fully participating on NMLS at this time. To see a list of currently participating states click here.
• Does not include information on applications not yet approved by a state.
• Does not include individuals working for federally insured depository institutions.
• Contains information that is self-reported to regulatory agencies by the licensed/registered company or professionals.
• Is updated nightly (business days only).

KB Homes and Countrywide Financial Named in Class Action Complaint Alleging Inflated Appraisal and Inflated Appraisal Fee Schemes

KB Home and Countrywide Financial Corp. have been named as defendants in a Class Action suit filed on October 30th, 2009 in the US Dist. Court for the Middle District of Florida - Orlando Division.  The attached suit details alleged predatory practices in an attempt to dominate mortgage lending and corrupt the loan underwriting and approval process.  Specifically, two schemes were identified.

Scheme 1 – Inflated Appraisals

According to the complaint, “Defendants KB Home, Countrywide and LandSafe, along with their network of staff and fee appraisers, formed and operated a criminal enterprise (the “KB-Countrywide Criminal Enterprise”) which through the “Inflated Appraisal Scheme” inflated the sale amounts of KB Home properties and loan amounts of Countrywide loans by corrupting the appraisals of KB home properties such that the appraisals would always indicate a value at or above the contracted sales price for the properties or were otherwise inflated.”

Scheme 2 – Inflated Appraisal Fee

According to the complaint, “Scheme 2 in this action arises from a scheme (the “Inflated Appraisal Fee Scheme”) between Countrywide and LandSafe to profit from:

(1) imposing marked-up appraisal fees on Countrywide borrowers; and (2) controlling the appraisal process and results.”

Scheme 2 works as follows:

According to the complaint, “Scheme 2 works because of:

1) Countrywide’s insistence that LandSafe be the appraisal firm that conducts the appraisal on the loan;

2) The secret agreement between Countrywide and Landsafe to mark up the actual cost of the appraisal and to have the actual appraisal done by a third party at a fraction of the cost listed on HUD-1 and final settlement statement; and

3) Concealment from consumers of the appraiser’s invoice to LandSafe. If Countrywide did not insist on LandSafe’s exclusivity, an independent appraiser would charge Countrywide the actual cost of the appraisal and Countrywide, through its subsidiary LandSafe, would be unable to skim off each appraisal hundreds of dollars for no services rendered.”

Click here to download and read the complete complaint: Download KBCountryWideComplaint

What Should the Good Appraiser Do When the FBI or Any Law Enforcement Officer Calls?

The FBI is on the Phone for You
By Peter Christensen

The FBI released a report earlier this year entitled 2008 Mortgage Fraud Report "Year in Review". It indicated the obvious: that reports of mortgage fraud and investigations of it by the FBI increased significantly in 2008. The FBI further indicated:

"With the anticipated continued upsurge in mortgage fraud cases, the FBI has created the National Mortgage Fraud Team (NMFT); fostered new and existing liaison partnerships within the mortgage industry and law enforcement; and developed new and innovative methods to detect and combat mortgage fraud.

In December 2008, the FBI established the NMFT to assist field offices in addressing the financial crisis, from the mortgage fraud problem and loan origination scams to the secondary markets and securitization. The NMFT provides tools to identify the most egregious mortgage fraud perpetrators, prioritizes investigative efforts, and provides information to evaluate resource needs."

One result of the FBI's intensified effort seems to be that appraisers have been getting more calls than usual from FBI special agents wanting to ask questions about particular reports. The agents almost never indicate specifically what they are investigating (other than "fraud"), who initiated the investigation, or who is the direct subject of the investigation. Often, the agents try to be friendly and say something like: "I'm looking at your report here and I'm just wondering if you can tell me a bit about how you arrived at your value" or "I have a review of your appraisal that has a much lower value, can you help me understand why?" Sometimes, the agents suggest that giving them some information will help them close up the file and not have to bother the appraiser again. The agents will then often also ask the appraiser to come down for an interview or tell the appraiser they'd like to come by and have a look at the file.

I have no doubt that there are some appraisers spread across the country who actually may have crossed the line and may have some culpability for engaging in intentional fraud. My post here is not for those appraisers. The typical situation I see, however, is much more innocent.

The appraiser receiving the agent's call is more typically scratching his head trying to figure out why the FBI would be interested in the subject report. It usually seems like the report under scrutiny is no different than any other assignment, except maybe there's been a subsequent foreclosure on the property. And, I do think that in most of these cases when an FBI agent is inquiring about an appraiser's report, there is likely nothing wrong with the report itself. In fact, I've recently seen inquiries from the FBI and other state and federal investigative agencies that seemed to be based on nothing more than a lender having a foreclosed mortgage and a low-ball retrospective appraisal in the file.

What should the good appraiser do when the FBI or any law enforcement officer calls?

• First, of course, you need to be friendly and polite. The last thing you want to do is give the impression that you're hiding something by being short or difficult.
• Second, try to determine if the appraisal report that the agent or officer has in front of him really is your work. We've seen cases were law enforcement launched investigations without any idea that the report in their hands obtained from the lender had been altered or forged. Thus, without discussing the results in your report, try to ask the agent or officer to tell you information from the report in front of him.
• Third, if the agent or officer wants to talk about the specifics of the report, you need to realize that your USPAP ethics duty of confidentiality to your client prevents you from doing so, unless you've received a subpoena (or court order) or have been authorized by your client. (If the investigator is with your state licensing or enforcement agency, the duty of confidentiality, however, does not prevent you from discussing or providing the report.) Thus, you'll need to politely advise the agent or officer that you have that duty to your client and that you cannot violate it by talking about the assignment or results.
• The same thing goes for complying with a request (as opposed to a subpoena) for your work file. Use this as an opportunity to politely and professionally break off the discussion and then consult with an attorney.

Even when a law enforcement investigation is not covered by insurance, your E&O provider should be able to provide a reference to a knowledgeable and economical attorney with whom you can discuss the situation.

Source: Appraisal Legal Defense and Insurance Blog by Peter Christensen and Robert Wiley - Legal issues and insurance matters affecting residential and commercial real estate appraisers

Lawsuit contends KB Home conspired with Countrywide and LandSafe to rig the appraisal process

Hagens Berman is claiming that KB Home illegally boosted profits through inflated home values and sales prices over the past two years in California, Nevada and Arizona. The firm is currently investigating similar cases in Florida.

The KB Home appraisal fraud seems to becoming a trend moving from the West Coast across the country. More homeowners are coming forward to report inflated prices of their homes, many from the 76 KB Home communities in Florida. In the two cases filed in California and Arizona on behalf of homeowners, KB Home inflated sampled appraisals by an incredible average of $82,169 per property.

Below is a release with more details on the investigation.

KB Home Target of Investigation in Florida, Hagens Berman Announces

FLORIDA – Hagens Berman, the law firm representing homeowners in class-action lawsuits in Arizona and California against KB Home (NYSE: KBH), Countrywide Financial and LandSafe Appraisal Services, is claiming the three conspired to illegally rig home appraisals in KB developments and has begun investigating similar claims in Florida.

The filed lawsuits contend KB Home (NYSE: KBH) conspired with Countrywide and LandSafe to rig the appraisal process in order to drive development prices upward and increase KB Home profits, often using inflated comparisons to justify the high sales prices.

"Since we filed the Arizona and California actions, we have heard from KB customers in other states saying they fell victim to similar practices,” said HBSS managing partner, Steve Berman.

“Many of those calls came from KB home purchasers in Florida.”

The lawsuit, filed earlier this month in U.S. District Court in Arizona, claims KB and the other defendants inflated home prices by as much as $280 million in Arizona and Nevada, and another $300 million in California using the same scheme.

As stated by published sources, KB Home has 76 communities in Florida. 

According to the filed lawsuits, KB Home directed home purchasers to Countrywide for financing and Countrywide funneled all its KB customers' home appraisals to a small group of appraisers at LandSafe, an appraisal subsidiary owned by Countrywide. According to the complaints, the appraisers would then deliver an appraisal value at whatever price point KB and Countrywide ordered.

In two KB Home developments cited in the complaint, sampled appraisals were inflated an average of $82,169 per property.

HBSS would like to hear from homeowners in Florida who purchased a house from KB Home and financed through Countrywide. To learn more about the allegations in the Arizona lawsuit, please visit www.hbsslaw.com/kbhomes  . Homeowners can also e-mail attorneys at kbhomes@hbsslaw.com  or call 206-623-7292.