Citing concerns about increased mortgage fraud, the Appraisal Institute this week spearheaded opposition to changes to an Obama administration program that allows broker price opinions in determining the minimum offer in “short sales” of homes.
The Appraisal Institute was joined by the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers in sending a March 8 letter to Treasury Secretary Timothy Geithner.
“We strongly believe continuing to allow ‘broker price opinions’ (BPOs) in the property valuation component will not adequately protect the public interest (consumer, borrowers, etc.) or the interests of the various parties to the loan (lenders, loan servicers, etc.) and is likely to exacerbate mortgage fraud,” the appraiser organizations wrote.
“We urge the Department to reestablish independence in the valuation process to protect the safety and soundness of financial institutions, improve transparency, and safeguard the public trust,” the appraiser organizations’ letter said, later adding. “We urge the Administration to revise the (Home Affordable Foreclosure Alternatives) HAFA guidelines to prohibit the use of BPOs for property valuation requirements involving foreclosure alternatives, including short sales.”
The appraiser organizations’ letter notes that law enforcement officials have highlighted loan modification fraud – including fraud involving short sales – as a new form of mortgage fraud. “We believe that such conflicts can and should be mitigated by implementing basic requirements reestablishing independence and competency in the valuation process,” the letter said.
Changes to expand the Home Affordable Foreclosure Alternatives program, set to take effect April 5, would allow defaulting owners to sell their homes for less than they owe and would provide them $1,500 in relocation assistance, according to The New York Times.
The Times referred to the plan as “one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions,” noting that 5 million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan reportedly has helped few of them.
To read the appraiser coalition’s letter to Treasury Secretary Timothy Geithner, visitwww.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2010/AI-ASA-ASFMRA-NAIFA_ShortSales.pdf .