The FBI is on the Phone for You
By Peter Christensen

The FBI released a report earlier this year entitled 2008 Mortgage Fraud Report "Year in Review". It indicated the obvious: that reports of mortgage fraud and investigations of it by the FBI increased significantly in 2008. The FBI further indicated:

"With the anticipated continued upsurge in mortgage fraud cases, the FBI has created the National Mortgage Fraud Team (NMFT); fostered new and existing liaison partnerships within the mortgage industry and law enforcement; and developed new and innovative methods to detect and combat mortgage fraud.

In December 2008, the FBI established the NMFT to assist field offices in addressing the financial crisis, from the mortgage fraud problem and loan origination scams to the secondary markets and securitization. The NMFT provides tools to identify the most egregious mortgage fraud perpetrators, prioritizes investigative efforts, and provides information to evaluate resource needs."

One result of the FBI's intensified effort seems to be that appraisers have been getting more calls than usual from FBI special agents wanting to ask questions about particular reports. The agents almost never indicate specifically what they are investigating (other than "fraud"), who initiated the investigation, or who is the direct subject of the investigation. Often, the agents try to be friendly and say something like: "I'm looking at your report here and I'm just wondering if you can tell me a bit about how you arrived at your value" or "I have a review of your appraisal that has a much lower value, can you help me understand why?" Sometimes, the agents suggest that giving them some information will help them close up the file and not have to bother the appraiser again. The agents will then often also ask the appraiser to come down for an interview or tell the appraiser they'd like to come by and have a look at the file.

I have no doubt that there are some appraisers spread across the country who actually may have crossed the line and may have some culpability for engaging in intentional fraud. My post here is not for those appraisers. The typical situation I see, however, is much more innocent.

The appraiser receiving the agent's call is more typically scratching his head trying to figure out why the FBI would be interested in the subject report. It usually seems like the report under scrutiny is no different than any other assignment, except maybe there's been a subsequent foreclosure on the property. And, I do think that in most of these cases when an FBI agent is inquiring about an appraiser's report, there is likely nothing wrong with the report itself. In fact, I've recently seen inquiries from the FBI and other state and federal investigative agencies that seemed to be based on nothing more than a lender having a foreclosed mortgage and a low-ball retrospective appraisal in the file.

What should the good appraiser do when the FBI or any law enforcement officer calls?

• First, of course, you need to be friendly and polite. The last thing you want to do is give the impression that you're hiding something by being short or difficult.
• Second, try to determine if the appraisal report that the agent or officer has in front of him really is your work. We've seen cases were law enforcement launched investigations without any idea that the report in their hands obtained from the lender had been altered or forged. Thus, without discussing the results in your report, try to ask the agent or officer to tell you information from the report in front of him.
• Third, if the agent or officer wants to talk about the specifics of the report, you need to realize that your USPAP ethics duty of confidentiality to your client prevents you from doing so, unless you've received a subpoena (or court order) or have been authorized by your client. (If the investigator is with your state licensing or enforcement agency, the duty of confidentiality, however, does not prevent you from discussing or providing the report.) Thus, you'll need to politely advise the agent or officer that you have that duty to your client and that you cannot violate it by talking about the assignment or results.
• The same thing goes for complying with a request (as opposed to a subpoena) for your work file. Use this as an opportunity to politely and professionally break off the discussion and then consult with an attorney.

Even when a law enforcement investigation is not covered by insurance, your E&O provider should be able to provide a reference to a knowledgeable and economical attorney with whom you can discuss the situation.

Source: Appraisal Legal Defense and Insurance Blog by Peter Christensen and Robert Wiley - Legal issues and insurance matters affecting residential and commercial real estate appraisers