Are State Regulators Ignoring Mortgage Fraud Claims?
A conference sponsored by the Appraisal Foundation identified the lack of enforcement on a state level as a major reason appraisals remain at the root of mortgage fraud. A lack of money and resources is hindering their ability to handle the large volume of mortgage fraud cases currently out there.
Case and point, during 2001-2002, on the the largest mortgage lenders, Fannie Mae, referred 860 cases possibly involving appraisal fraud to state regulators. Of those, action was taken in 391 cases: 118 appraisers lost their license and 273 were sanctioned in some way. However, as of October 2006, nothing had been done in the remaining 496 cases.
Several organizations are calling for preventative measures and greater regulation on a local, state and federal level. The Appraisal Insitute is throwing their support behind federal bill H.R. 1295, the Responsible Lending Act. The bill, if passed, would prohibit coercion and give regulators more enforcement power to issue fines and levy penalties against anyone who pressures appraisers to produce fraudulent valuations. And on a state level, Utah, Michigan, North Carolina and Arkansas have passed legislation that makes it illegal to coerce appraisers into making false valuations.