On the front lines against mortgage fraud

Mortgage fraud has made headlines locally and nationally. Most of the time, mortgage fraud involves identity theft or fraud — making a borrower appear to be somebody else, with a better job, more income or fewer debts. Somebody more creditworthy.

But some mortgage fraud involves a broker or loan officer telling the lender — and the borrower that the house is worth more than it is. This way, they can close a larger loan and make a bigger commission. Since real estate agents also usually make a percentage of the sale as commission, sometimes they can be involved. In reality, most loan officers, mortgage brokers and real estate salespeople are ethical and would never think of engaging in mortgage fraud. But mortgage fraud of this type always originates with one of the parties who makes a commission on a closed sale or loan.

Sometimes, fraud like this can be accomplished without an appraiser involved. Honest, professional appraisal reports are altered, or honest, professional appraisers' signatures forged. But a complicitous appraiser often makes it easier to perpetrate mortgage fraud. During south Florida's 'boom years', when real estate values skyrocketed, many new people flooded the real estate and finance industry in unprecedented numbers. Only a tiny minority were well-trained, and they now have only the experience of a very abnormal market, followed by a compensating correction.  In the wake of subprime issues, when lenders have tightened guidelines, many now feel they must "compete" by 'going along' with mortgage fraud, because there are now too many less-qualified mortgage and real estate people, including appraisers, in a vastly changed market climate.

Clearly, the very experienced appraiser is also homeowners', lenders' and the economy's best defense against mortgage fraud. That person was here 20 years ago, during the last market cycle like this. Our founder and president is equipped with the experience and ethics you need.

Appraisers are paid a set fee for their work whether a deal is closed or not. Appraisers are hired by and work for the lender that is considering loaning the money to buy or refinance a house. That lender is interested in an objective, third party, professional opinion of the true value of the home. The lender needs to know that if the borrower defaults, the collateral used to secure the loan — the house — is valuable enough to cover their loss.

Appraisers sometimes are retained for individual, commissioned loan officers, mortgage brokers or real estate agents. In that case, there is often pressure to "make the deal work," rather than arrive at a professional, considered opinion of market value. Appraisers seldom work for borrowers, at least in the context of a mortgage loan. But borrowers work closely with mortgage brokers, loan officers and real estate agents, and benefit the most from an experienced and objective valuation of the home.

If something catastrophic happens, such as a job loss, illness, divorce or death - and today, even an Option ARM loan re-sets unexpectedly high - and a borrower can no longer make payments on the home they've mortgaged, they will need to be able to sell the home for enough money to cover the balance of their mortgage. So, nobody benefits more from an appraiser's professional opinion of value on a home than the new homeowner, even though there is no direct client relationship.

Like some mortgage brokers, loan officers and real estate salespeople, some appraisers are "bad apples" and will agree to go along with a scheme to defraud lenders and homebuyers so bigger commissions can be had. Not us, and not the vast majority of appraisers. Again, the appraiser is paid a set fee whether the loan closes or not, and does not work for any of the commissioned parties to the transaction. Appraisers are therefore a homeowner's, and a lender's, best front line defense against mortgage fraud.