This article first appeared in the March 2007 issue of Valuation Review and is reprinted here with their permission.

First National Appraisal Congress in session this fall

Consensus solutions to problems plaguing the valuation industry should arrive this fall, with Zaio Corp. and Real Estate Technology News’ sister publication Valuation Review teaming up for the National Appraisal Congress in Washington, D.C., which will aim to protect consumers, reduce the threat of rapidly increasing mortgage fraud and preserve the independence of appraisers. (3/21/2007)

Protecting American consumers, reducing the threat of rapidly increasing mortgage fraud and preserving the independence of appraisers are among the goals of the inaugural National Appraisal Congress.

The congress, hosted by October Research Corp. and sponsored by Zaio Corp. and Valuation Review, will convene this fall in Washington, D.C.

The exclusive invitation-only event will bring together top thought leaders from the valuation industry, consumer groups, regulators and appraisal trade organizations.

One objective is to develop solutions to the increasing pressure appraisers have been reporting from mortgage brokers, lenders and real estate agents to hit a predetermined value, or to overstate a property’s condition.

Joe Casa, founder and publisher of October Research Corp., said there is a responsibility to the American consumer and the appraisal industry to provide both short- and long-term solutions to this problem of pressure on appraisers.

“As an independent news and research company, we have been asked by different segments of the industry to facilitate discussions among all the parties being impacted by pressure on appraisers,” Casa said.

The National Appraisal Congress will be organized using a committee approach and will include working groups on data ownership, regulatory processes and fraud/lender pressure.

Thomas J. Inserra, CEO of Zaio said, “Our nation has experienced the banking and S&L crisis in the late 1980s and early 1990s. Congressional hearings and industry sessions held after those events determined that abuses relating to the valuation of collateral used in real estate loans were a significant contributing factor to that financial crisis. There have been suggestions that lender pressure, mortgage fraud and other appraisal related issues of today may have contributed to the recent sub-prime mortgage market collapse. This National Appraisal Conference will allow today’s thought leaders to identify a full range of possible solutions aimed at protecting consumers, preserving the independence of appraisers, averting another tax-payer funded bailout and restoring the confidence in our financial services sector.”  

Following the National Appraisal Congress, recommendations will be made to several political, consumer and regulatory groups in an effort to craft a consensus solution to the problems of pressure, appraiser independence and mortgage fraud. 

“This may be the most important process the industry has seen that can bring swift and meaningful answers to many of the problems currently plaguing the valuation industry and its customers,” said John Ross, vice president of Zaio Corp. and former CEO of the Appraisal Institute.

Zaio, based in Calgary, Canada, with U.S. headquarters in Scottsdale Arizona entered the U.S. market in 2005 bringing new valuation technologies and a whole market analysis approach in an attempt to re-engineer appraisal methods to better aid consumers and reduce the chance of mortgage fraud for lenders.

Valuation Review is an independent and full-time newsroom that publishes premium news and analysis for appraisal and valuation professionals. With more than 10,000 readers, subscribers include secondary market executives, valuation professionals, regulators and executives from the mortgage and real estate industry.

In the 2007 October Research “National Appraisal Survey,” the Richfield, Ohio-based research company — with the help of industry trade associations including the Appraisal Institute — surveyed more than 1,200 professional appraisers from all 50 states, the District of Columbia and Puerto Rico. 

The research, co-sponsored by Forsythe Appraisals LLC and Valuation Review, takes an in-depth look at residential appraisal business practices, technology usage and customer relationships.
According to the survey results of “Volume I: Appraisal Business Practices,” 90 percent of real estate appraisers feel pressured to restate, adjust or change property values. That number is up sharply from October Research’s 2003 survey, which reported that 55 percent of appraisers felt pressured by mortgage brokers, lenders, real estate agents and homeowners to overstate property values or conditions. 

Additionally, in a recent report issued by the Justice Department’s FBI, the rate of mortgage fraud in the USA is also up considerably in recent years.

Brokers, lenders, real estate agents and, in some cases, homebuyers pressure appraisers to render an opinion that exceeds the property’s actual value. When that happens, banks can end up lending more money for a home than they normally would. Homebuyers and homeowners can unknowingly place themselves in a situation where the loan they obtained is greater than the value of their property, increasing the likelihood that the borrower will lose their home in a future bank foreclosure.  

Alan Hummel, SRA, senior vice president and chief appraiser of Forsythe Appraisals, pointed out that the first volume of the survey confirms, what until now, was only speculation of the appraisal concern surrounding the residential valuation practice.

“As the real estate market downshifts, competitive market play is on the upswing,” he said. “Fewer applications can increase the pressure on mortgage lenders and real estate agents to turn the potential into a successful close.” 

For more information on the 2007 October Research “National Appraisal Survey,” visit http://www.octoberstudies.com/nas2007.

 

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