Alan Hummel, spokesperson for the Appraisal Institute, in prepared testimony Tuesday before a Senate subcommittee on mortgage industry abuses blamed poor regulation of mortgage brokers and lenders, and weak or nonexistent enforcement of real estate practitioners for the practice of "hitting the number" (aka inflating the value of a property to meet the purchase price and make the lender "happy" and the deal go through). Hummel pointed the finger at mortage lenders and said,

"Appraisers face pressure from various parties involved in mortgage transactions. They are told to doctor their appraisals or else never see work from those parties again."

So what Alan Hummel is saying is that the lender is to blame for the personal decision of an appraiser to basically lie, cheat and steal consumers and investors out of money by falsley inflating the value of a property and the documents that "support" that value?!

Yes, Hummel is correct that the lender (and some agents/brokers) would have stopped using the appraiser if they didn't "hit the number" and/or given them a very hard time, to say the least. To the appraiser, that may mean losing a client and going hungry, which is not good at all. But that is not an excuse for any appraiser to do something unethical and highly illegal.

People don't get out of going to jail for robbing someone at gun point for a few bucks in their wallet because they were tired, homeless and broke and needed something to eat. So why is it that an appraiser who fudged the numbers and stole thousands of dollars from consumers and investors/banks doesn't go to jail and gets to blame someone else?

To put it in perspective, let's see how much an appraiser that fudged the values for a period of one year could have robbed consumers and lenders (using conservative numbers)...

• An average appraiser does about 5 to 7 appraisals per week so let's stick with 5 to be on the conservative side.
• The average price of a home in this area (Loudoun County, Virginia just outside of Washington, DC) is $450,000.
• If the appraiser elevated each appraisal by just one percent (sure they did much more than that in the boom market days), that's $4500 per property.
• Take $4500, mulitply that by 5 (appraisals per week) and then 52 (weeks in a year) and that's $1,170,000.

That's right - one million, one hundred and seventy thousand dollars per year! And that's just ONE appraiser!

Now here's the kicker...these same appraisers that are doing this are the ones that basically have total control over how many, if any, new appraisers are allowed to enter the industry. How? Because to become an appraiser, you have to apprentice under a veteran appraiser prior to being able to conduct your own appraisals. And since a new appraiser means more competition to existing appraisers, imagine how few "veterans" actually volunteer to do this - close to none!

The appraisal industry is completely backwards and needs to be revamped from top to bottom. And Alan Hummel and the rest of the Appraisal Institute is off on the wrong foot in order to do so. They need to look at themselves and stop blaming others.

Source: CNNMoney.com