One type of fraud we see on a somewhat regular basis occurred today. Here’s how it went.
We received a first time order from an out of state mortgage banker to perform an appraisal of a high end condo worth over $7M). The unit owner had wanted to have “their appraiser” perform the assignment but the lender wanted us to do it because they were more comfortable with our reputation.
We require payment before we release an appraisal for clients we do not have a track record with. The lender asked us to collect at the door. The couple paid us for the appraisal and we completed and delivered it to the lender as agreed.
The check sent by the applicant subsequently bounced (this was a complex property and an above average appraisal fee). We called the husband to request a new check to be sent to pay for the appraisal fee owed but we could not reach him. We called the wife who indicated that she will give the message to her husband but said “we did not do our job and bring the value in at the amount they wanted.”
The couple ended up hiring that other appraiser and guess what? Their value was higher than ours. The lender told us that they will not accept the other appraisal. The irony here is that the deal worked with our value estimate so this is a matter of pure ego by the couple.
I was so annoyed I called the appraiser. They (shouldn’t have spoken to me about it) said they knew that the purpose of the assignment was refinance but said that the lender ordered it directly (the lender – our client – denies this). If the appraisal was actually ordered and engaged by the borrower, not the lender, and the appraiser knew that it was a refinance, they should not have accepted the assignment and they violated the terms of their certification. This has been a “no-no” for a long time See OCC letter [PDF]. If I find out that this is true, I will submit their name to the appraisal review board in our state.
So now we are in a situation where we have been engaged to complete an appraisal. We completed it. The borrower appears to have intentionally bounced the check in order to get back at us for not “making the number.” Our report may actually be used for the deal but we have not been paid for it. The borrower will end up paying for two appraisals. Nearly everyone loses.
The lender indicated they will pay us by debiting the funds on account with the borrower. If this doesn’t work out, we will likely sue the borrower for bank fraud or send the lender to collection. I was told by a major lender about 10 years ago that intentionally bouncing a check is bank fraud. Of course we have to prove whether its intentional.
Moral: We have become viewed as an impedement to the deal and the originator and ourselves, may also be victims. Hello out there. Does anyone really want to know what the value is?