Report: Lenders blacklisted appraisers

A nonprofit that specializes in investigative journalism says it's obtained copies of blacklists that lenders used during the housing boom to boycott thousands of appraisers who refused to inflate home values.

In a story examining the role of appraisals in the housing boom and bust, the Center for Public Integrity says it also found many appraisers who bowed to pressure from lenders to "hit the numbers." The practice "helped pump air into the housing bubble that led to widespread economic devastation," the story concludes.

Online mortgage lender Amerisave maintained a list of nearly 12,000 "ineligible" appraisers that was available on the company's Web site until the Center inquired about it, the story said. Amerisave declined to comment for the story, "The Appraisal Bubble."

The story also details New York Attorney General Andrew Cuomo's lawsuit against First American Corp., which claims First American's appraisal management company, eAppraiseIT, allowed Washington Mutual to handpick appraisers and pressure them to change values that are too low to permit loans to close.

First American has denied the allegations and the lawsuit is still pending. But after Cuomo subpoenaed Fannie Mae and Freddie Mac, the mortgage financiers agreed to new rules governing appraisals of the loans they buy (see Inman News story).

The Home Valuation Code of Conduct, slated to take effect May 1, prohibits loan originators from pressuring appraisers, and gives appraisers the right to appeal decisions to remove them from lists of qualified appraisers. The code will also prohibit originators from ordering appraisals directly, requiring them to use other in-house staff or go through an appraisal management company.

A trade association representing appraisers, the Appraisal Institute, and many independent appraisers say the code will not solve the problems it seeks to address, because appraisal management companies -- many of them subsidiaries of lenders -- may pressure appraisers, the story said.

The Center for Public Integrity is a nonprofit digital news organization that conducts research and produces investigative stories on public policy issues. The story on appraisal practices was part of the Center's Land Use Accountability Project, which details how land use issues play out at the local level.

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