Support is growing on Capitol Hill to correct what real estate appraisers say is their biggest problem: Intimidation and pressure on them to "hit the number" desired by mortgage loan officers and others.

Even the giant of the home real estate industry --the 760,000-member National Association of Realtors -- now supports federal legislative language prohibiting lenders and mortgage brokers from influencing appraisers' residential valuations. A senior NAR official told Realty Times last week that although the association has not formally announced it, NAR has decided to endorse a federal legal ban against lender interference with home appraisals.

Appraisers have complained bitterly in recent years that they are frequently pressured to value homes at the price needed to make the sale or refinancing go through. Appraisers who don't cooperate with loan officers say they are either blackballed and receive no further assignments, or are stiffed on fee payments. Over 6,000 appraisers have signed an industry-wide petition demanding an end to such pressure.

The Appraisal Institute, a leading trade group, has called for congressional hearings on the problem.

Legislation that includes the specific federal ban sought by appraisers was introduced last month in the House by Rep. Jan Schakowsky (D-Ill.). The bill, known as the Save Our Homes Act (H.R. 2531), is primarily aimed at curbing "predatory lending" practices.

NAR, considered the most powerful real estate lobby on Capitol Hill, has not endorsed Schakowsky's bill as a whole. But after an NAR Appraisal Subcommittee group visited key mortgage lending and financial regulatory officials in Washington in early August, the association endorsed the portion of Schakowsky's bill banning interference with appraisals.

The language now backed by the NAR is broad and tough: It would amend the federal Truth in Lending Act to prohibit a "creditor" or "mortgage broker" from "influencing the independent judgment of (an) appraiser with respect to the value of real estate that is to be covered by a conforming home loan or is being offered as security according to an application for a conforming home loan."

Any infraction would constitute a violation of the Truth in Lending Act, subjecting the violator to federal suit and fines of $10,000 per violation. Although regulations implementing the ban would have to be drafted by the Federal Reserve, the language in the bill would appear to cover a wide spectrum of situations, including loan officers "shopping" a contract by faxing competing appraisers the price "needed" for the deal. Appraisers unable to "pre-comp" -- provide a preliminary valuation hitting the number --never get the assignment.

Appraisers such as Francois (Frank) K. Gregoire, of St. Petersburg, Fl, a member of NAR's Appraisal Subcommittee, say that attempts at influencing valuations like this are almost everyday occurrences in the industry, and that appraisers "should just say no." More serious are forms of pressure where appraisers who already have an assignment are asked to fudge the numbers -- bump up the value by the $10,000 $20,000 or $50,000 needed to close the sale or refinancing.

Sam E. Blackburn, president of the Association of Appraiser Regulatory Officials, says inflated appraisals are dangerous for banks and other financial institutions, and force appraisers to violate their own professional and ethical standards to earn their income.

The Schakowsky bill language endorsed by the NAR would allow appraisers to report and document illegal pressure from lenders and mortgage brokers to federal authorities.

Although the bill in its present form isn't likely to move on the House side unless Republicans decide to take up the subject of predatory lending, the Democratic-controlled Senate already has held hearings in that area. Should a predatory lending bill emerge in the Senate this session, Schakowsky's language on appraisals could well end up as part of it, and move to the House.

Appraisers say they are pushing for precisely that. And with the real estate heavyweight of Capitol Hill on their side, their chances of success are far better.

For more articles by Ken Harney, please press here.

Published: August 13, 2001

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.