Martinez: Housing Appraisal Reform Will Protect Consumers and Lenders
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MARTINEZ: HOUSING APPRAISAL REFORM WILL PROTECT CONSUMERS AND LENDERS
U.S. Senator Mel Martinez (R-FL) today joined with Senator Bob Casey (D-PA) in introducing legislation to reform the appraisal process for home purchases and deter appraisal fraud schemes. The Fair Value and Independent Appraisal Act is a move by Senator Martinez to continue his work towards reforming and strengthening oversight of the mortgage system.
"There are some truly bad actors out there posing as legitimate appraisers. The ripple effect has worsened the mortgage crisis," said Senator Martinez, former Secretary of the U.S. Department of Housing and Urban Development. "There continue to be too many unchecked components in the appraisal process. This will protect both consumers and lenders by improving oversight and putting more checks in place."
In cases of appraisal fraud, an appraiser and a mortgage broker work together to sell homes at higher prices than they are worth. An appraiser inflates the value of a property, which increase the size of the mortgage. While the unsuspecting homebuyer is stuck with an over-valued home and expensive mortgage, the scammers make out with more money from an inflated broker fee. These homeowners often end up in foreclosure and the lender is left with a worthless home.
"A disturbing byproduct of the increased rates of foreclosures is unscrupulous individuals trying to profit from other people's losses," said Senator Casey. "Stopping these flipping schemes will help give confidence to those buying homes that appraisals on their new homes are accurate and won't come back to haunt them later."
This legislation will: Require a physical property visit and a second independent appraisal for any high-interest, high-risk mortgage offered for a property sold at a higher price within 180 days of its last purchase; ensure appraiser independence by prohibiting interested parties from improperly influencing a property appraisal; ensure that appraisers are qualified and follow certain minimum standards; require a mortgage originator to make available to the credit applicant all appraisal valuation reports no later than three days prior to the transaction closing date; and set increased civil penalties for violating these provisions ($10,000 for 1st violation; $20,000 for 2nd).
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