CHICAGO, March 9 /PRNewswire-USNewswire/ -- Citing concerns about increased mortgage fraud, four organizations representing more than 35,000 real estate appraisers today voiced their opposition to changes to an Obama administration program that will encourage "short sales" of homes. The coalition was led by the Appraisal Institute, the nation's largest organization of real estate appraisers.
A short sale occurs when a lender accepts less than the full unpaid balance of a loan rather than foreclosing on a defaulting owner's property. The Obama administration's program allows broker price opinions to be used to determine the value of properties to establish a minimum offer of a short sale. Broker price opinions, or BPOs, are estimated values of a property as determined by a real estate broker; they are not the same as appraisals.
"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 said in a letter to Treasury Secretary Timothy Geithner. It was signed by the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers.
"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, click here.
To read The New York Times' March 8 story on the Obama administration's program, click here.
Continue reading "Appraisal Institute Opposes Obama Administration's Plan for Homeowner 'Short Sales'" »
Posted by Brian Davis on March 11, 2010 in Appraisal Organizations
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