This article was first published in the latest edition of the Appraisal Buzz Magazine. Subscribe now to never miss an edition.
As appraisers it is common to hear stories about mortgage fraud. But you never expect to be involved (at least not intentionally). It is usually a friend of a friend or stories you hear in a continuing education class but not you. All that changed for me in one phone call.
I received a call from a new mortgage broker company. Although I was always reluctant to have a mortgage broker as a client, these people seemed okay and the pay was substantially higher. Red flag? Maybe, but at the time it seemed like it was a blessing.
They had reasonable turn times and never pressured me for values. My reports were substantially lower on all six of the assignments completed without any revisions or reconsideration requests. Great, I thought, a client that just wants to know the value. It was a normal work day until I received “that” call with a few questions on the appraisal.
Since the mortgage broker was my client, not the caller, I had confidentiality concerns. The reviewer informed me he wanted to give me a few details about an inconsistency with the comps. I indicated that I could not discuss the details but would be happy to hear the problems.
Comp 4 in my appraisal reportedly sold for $100,000 less than all of the other sales but looked similar to the other sales. Looking at my report, there were no inconsistencies as that sale sold around $90,000, just like the other comparables that were provided. It was a model match appraisal in a patio home development. A pretty easy appraisal.
He proceeded to read the sale prices from his copy of my appraisal report of the other properties which all had $100,000 added to them. Tampa, Florida has always had credible public record data and therefore the reviewer knew the prices were inflated. In addition, my net and gross adjustments did not match the new prices. Sadly, the institution at the time did not check unless they had reason. I listened but was unable to comment. However, judging by my obvious shock, the reviewer understood there was fraud taking place. Unfortunately, their protocol was to freeze the accounts, but they did not report the findings. I asked for a copy of their version of my report to be emailed and they were more than happy to oblige.
Now what do I do? This was uncharted territory for me. How many appraisals did the broker change and not make a mistake, or it wasn’t caught? Plain and simple, it was fraud.
At that point, I decided I would call the FBI and file a complaint. The Tampa FBI indicated they would need multiple complaints to investigate. I was furious! How do you know there are not several incidences without an investigation? I was given no answer nor direction.
Next step, I thought the Florida State Real Estate Appraisal Board should be able to help or at least point me in the right direction. Unfortunately, that did not go as expected. They indicated that they would look out for my reports if they were submitted for investigation. So, there’s that!
A colleague at the time indicated I should contact Frank Gregoire, the former President of the Florida Real Estate Appraisal Board. I reached out and explained the situation, and Frank replied and told me I should contact Joan Trice, CEO of Allterra Group. I had not heard of Joan at the time, but I wanted justice. He explained that she was very well known across the valuation industry and had been researching unscrupulous practices from some companies. After making contact and discussing the issue, Joan pointed me in the right direction. I filed a formal complaint with the Florida Office of Financial Regulation.
Shortly after filing the complaint, I moved to Denver and started working for a company doing repurchase reviews for one of the GSE’s. My professional growth during this time was very incredibly valuable. I discovered that I had no significant finding letter written on my appraisals. I was relieved that none of these fraudulent appraisals were processed through. Eventually a letter arrived from the Florida Office of Financial Regulation thanking me for filing the complaint. The letter explained that the broker had pleaded guilty to mail fraud on the six appraisals that I had completed.
Even to this day, it is scary to think how many appraisals from other appraisers were possibly changed, but not discovered. What would have happened if the reviewer never contacted me? Who would believe that I did not misrepresent the sales price?
Mortgage Fraud continues to be a problem in the valuation industry. Everyone involved must be diligent to prevent the misuse of information that perpetuates fraud. Someone once said that many of life’s failures are people who did not realize how close they were to success when they gave up. Don’t let someone else rewrite your story through fraud. Take whatever steps are necessary and be diligent to find the right person who will listen until the issue is fully resolved.
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