Wouldn't you like to know that the person appraising your home is competent and able?

At first this sounds like a good idea. Should we not know which appraisers are best? Ah, but the devil is in the details and HUD's efforts to show Appraiser Claim and Default Rates are a calamity.

On the HUD page you can sort appraisers who do FHA work by name and location -- and also by defaults and claims. This seems fairly reasonable: After all, if appraiser Smith does 10 appraisals and five wind up in foreclosure, would you hire Smith to do more work?

In a word, the answer is "no" -- unless you thought about it a little more.

Appraisers are paid a fee to provide an independent estimate of value. Valuations are based on such factors as the sale of like homes (the norm for residential real estate), the amount of income a property can produce, or the cost to replace a property. Appraisers are selected by lenders -- not borrowers -- to make sure that mortgage suppliers do not lend too much for a given property and thus increase their risk.

A "default," says HUD, means a homeowner has been at least 90 days late on their loan. A "claim" is defined as a situation where a home has gone to foreclosure.

Notice that in the description of what appraisers do it says nothing about qualifying borrowers for loans. If Bensen buys a home that appraiser Smith says is worth $200,000 and Bensen later defaults, that does not mean the appraisal was wrong or that Smith did anything which was unfair, unprofessional, or illegal. Buyer Bensen, for example, may have defaulted because of a job loss or the need to pay costs associated with a major illness.

Appraiser Smith did not qualify Benson for the loan. The lender, loan officer, and loan underwriter did -- following the extensive standards and guidelines established by HUD itself.

Appraisers value homes. They do not collect monthly mortgage payments and so they have no idea who is current, who is late, or who is being foreclosed. The fact that a borrower fails to make loan payments does not mean the house is worth a dime less than the appraiser's estimate.

"The concern with the list," says Francois K.Gregoire, an appraiser in St. Petersburg, FL and a member of the state regulatory Appraisal Board, "will occur if and when lenders start choosing appraisers on the basis of the 'claim' or 'default' statistics. Some competent appraisers might start losing work or might be unjustifiably passed over due to the numbers."

HUD's own Appraiser Performance and Sanctions Matrix does not include any provision for the gathering of default statistics or the publication of appraiser names. The system provides no opportunity to contest a rating prior to posting (and the publicity that results from such postings), no grounds under which an appraiser can appeal his or her listing once posted, and no opportunity for appraisers to comment when listed on the site.

In effect, HUD has found a way to rank appraisers based on criteria which do not apply to the services they actually provide. This is the equivalent of rating the medical expertise of doctors according to the number of auto magazines in their waiting rooms.

Compare what HUD is doing with the steps taken by state regulators when the ability of an appraiser is questioned.

In a typical case, a complaint is received, the matter is investigated, citations are issued for minor infractions, and when big errors, incompetence, or fraud are found then fines, license suspensions and even license revocations can be ordered. Throughout the entire process the appraiser has a right to present his or her story -- a reasonable requirement given that someone's reputation and livelihood may be at stake.

A new Administration is coming to Washington and it has the opportunity to do the right thing. In the same way that the Appraiser Claim and Default Rate page magically appeared online without announcement, it can be deleted in the same way.

Published: January 4, 2001

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .