California Real Estate Fraud Report

You have just entered the #1 private-sector resource on the Internet for real estate fraud. In doing so, you have voluntarily left the dimension of the conventional real estate world and crossed over to the Dark Side, the realm where greed, dishonesty and evil are the order of the day. Sign up for a free subscription to this comprehensive news resource and receive weekly, timely news reports about real estate fraud, mortgage fraud, short sale fraud, REO fraud, title fraud, loan fraud, appraisal fraud, affinity fraud, loan modification scams, securities fraud and elder financial fraud.


Appraisal Fraud is Key to Fraudulent Loans

In a Los Angeles Times article published today, reporter E. Scott Reckard interviews appraiser Steven R. Smith of Redlands, who explains the role that fraudulent appraisals have played in the current real estate crisis.

That the California State Office of Real Estate Appraisers has enacted new rules that require 67% more education for appraisers beginning this year will not stop the problem. Nor will a new law recently signed by Governor Schwarzenegger making it illegal to pressure an appraiser be a cure-all: for one thing, it applies only to real estate professionals and not to the principals (buyer and seller) of the transaction.

Smith says that appraisers are often expected to write three or more appraisals per day, causing them to rush and do a less than thorough evaluation of the property in question. Allied professionals who are commission-based may also attempt to exert improper influence to obtain a higher appraisal. That, and outright fraud has resulted in “puffed” appraisals that on a system-wide basis, distorted market values, made home ownership unaffordable to many, and is a component in what will most likely be a major re-setting of prices in many markets and a likely recession.

The most spectacular example of a organized real estate fraud ring is the well-publicized story of real estate developer and admitted criminal Mark Alan Abrams, who along with federally indicted Beverly Hills real estate agents Joseph Babajian and Kyle Grasso, helped himself to more than $100 million of money from lender Lehman Brothers Bank (see the story below from December 31). In this case, the also-indicted appraisers Lila Rizk and L. Scott Robinson sometimes more than doubled the actual value of Westside homes in order to obtain exorbitantly inflated loans.

Still another problem is the practice of large lenders using computer-generated appraisals to save time – and presumably money. Washington Mutual, aka WaMu, is currently under investigation by New York State Attorney General Andrew Cuomo for allegedly pressuring eAppraiseIT, a subsidiary of First American Corporation, to puff up appraisals for subprime loans, which yield a higher profit margin.

My musings: cheaper is not always better. The businesses that practice this mantra of being penny-wise, pound-foolish are like drunken customers thinking they can beat the slot machines: save a few hundred on a reputable appraisal and risk as much as several hundred thousand dollars on a bad loan. Greed is not good, contrary to stockbroker Gordon Gekko in the film Wall Street. In this case it was, and is, beyond stupid.

© Copyright 2007-2017 Monique Bryher

Legal Disclaimer.

The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

ALL RIGHTS RESERVED. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the author, except for the inclusion of BRIEF QUOTATIONS in a review.


Copy Protected by Chetan's WP-Copyprotect.