Quality Mortgage Service believes some appraisers are systematically being pressured to use a subset of market data that skews the calculated market value of the property backing the disputed mortgage. QMS says the scheme, which it calls FRAFing, or field review appraisal fraud, is often found in appraisals when mortgage repurchase demands are pushed backed to lenders for a claim based on a field review appraisal value. “The appraiser or someone is manipulating data and/or information in sections of the appraisal to obtain a targeted value result,” QMS President Tommy A. Duncan says. “They are ignoring the higher value of comparable so that a lower value is supported in the appraisal.” The data used to compare to the property is nearly always restricted to the bottom 20% to 30% of sale prices in the market area, Duncan says.
So is this the smoking gun?? Housingwire reports that Quality Mortgage Service audits are showing a systematic attempt to keep appraised values low when it comes to repurchase claims. Now, this isn't the same thing as purchase appraisal issues but if arms can be twisted in this case, maybe it can on the purchase side?
“What we are finding, when supporting repurchase defenses, is a concerted effort to base an opinion of market value on the lower one-third of market data that produces erroneous estimates for approximately 65% of the properties appraised — assuming equal market distribution,” he adds. Financial institutions are FRAFing because of intense pressure to successfully push back loans for repurchase, Duncan claims. “It is a conclusion I am making because it does not make sense for an appraiser to overlook the obvious,” Duncan says. “Therefore, the act must be based on pressure and not sloppy work.”
Here we go again. If appraisers are being squeezed and threatened to manipulate results, then those applying the pressure should be significantly punished. I would love to say I'm surprised, but things like this happen and of course denials fly. Something like this just further undermines an already hammered profession...and adds fuel to the argument that appraisers are intentionally "low balling" values. One that I still maintain is unsupported.