Fraud Study Shows Importance of Competence, Ethics: Appraisal Institute
CHICAGO (April 26, 2010) – A new study indicating that reports of mortgage fraud in the United States increased 7 percent from 2008 to 2009 shows why lenders need to hire competent, ethical appraisers, Appraisal Institute President Leslie Sellers, MAI, SRA, said today.
“These results are further evidence that lenders need to reconsider who they engage to perform appraisal assignments,” Sellers said. “The best way to mitigate real estate valuation fraud is to hire a competent, ethical appraiser.”
The Appraisal Institute is the nation’s largest professional organization of real estate appraisers. Sellers was reacting to the 12th Periodic Mortgage Fraud Case Report by Mortgage Asset Research Institute, a LexisNexis® service, issued today at the Mortgage Bankers Association's annual National Fraud Issues Conference in Chicago.
The Appraisal Institute’s own research has found that disciplinary actions against appraisers, as reported by the Appraisal Subcommittee, have increased each year since 2005. There were 2.6 times as many disciplinary actions from Jan. 1, 2005, to April 1, 2010, as in the previous five-year period. The Appraisal Subcommittee of the Federal Financial Institutions Examination Council, created by Congress in 1989, oversees the real estate appraisal process as it relates to federally related transactions.
The Appraisal Subcommittee reported 162 disciplinary actions in 2005, 198 in 2006 (a 22.2 percent increase from the previous year), 280 in 2007 (41.4 percent increase), 337 in 2008 (20.4 percent increase) and 413 in 2009 (22.6 percent increase). Through March 31, there have been 78 disciplinary actions reported this year.
“Regardless of how many of these disciplinary actions were fraud-related, these figures further drive home the point that appraiser competence and ethics are vital,” Sellers said. “The Appraisal Institute prides itself on its education, publications and other tools to enhance appraisers’ competence and ethics.”
Although Appraisal Institute members represent a large proportion of the total U.S. appraiser population, they have been much less likely to be subject to disciplinary actions by the states than other appraisers. In fact, non-Appraisal Institute members received more than 8 times as many disciplinary actions than members did during the past five years. Appraisal Institute members comprise about one-fourth of the U.S. appraiser population.
The Appraisal Institute’s research is based on an analysis of data found in the Appraisal Subcommittee National Appraiser Registry.
To see the Mortgage Asset Research Institute’s fraud report index, click here.
The Mortgage Asset Research Institute describes itself as “a premier provider of mortgage fraud prevention solutions and information services to the mortgage and financial services industries. The 600-plus subscribers represent the entities involved in more than 80 percent of the wholesale mortgages originated in the United States.”
The Appraisal Institute is a global membership association of professional real estate appraisers, with more than 25,000 members and 91 chapters throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Members of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA and SRA designations. For more information regarding the Appraisal Institute, please visit www.appraisalinstitute.org.