A new California law, signed into law by Gov. Arnold Schwarzenegger, makes it a crime in California for any interested party in a real estate deal to pressure an appraiser to appraise a property for a predetermined amount. The bill, S.B. 223, is designed prevent appraisers from being pressured by mortgage brokers, homeowners or others to make a sale go through. Gov. Schwarzenegger signed S.B. 223 into law on October 5 and it became effective immediately.
California Sen. Michael J. Machado, Chair of the state's Senate Banking, Finance & Insurance Committee, introduced S.B. 223 in February, as part of a broad-based response to the problems pervading California's mortgage and housing markets. The bill will help prevent real estate professionals from colluding to inflate property appraisals.
"I have been involved in efforts to curtail predatory and abusive real estate lending practices for nearly a decade," said Machado. "During that time, I have heard numerous claims about the insidious practice of appraisal inflation. More recently, inflated appraisals have been identified as a contributing factor to the subprime mortgage meltdown California is currently experiencing. I introduced S.B. 223 to stop the practice, once and for all."
S.B. 223 is the first California or federal law that explicitly forbids persons involved in a real estate transaction from pressuring an appraiser to ‘hit' a target value. The bill punishes violators with license suspension or revocation and with potential civil action. "I expect S.B. 223 to act as both a deterrent and a mechanism for punishing those who violate its provisions," concluded Machado.
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