The inmates must be in charge of this asylum

Wednesday, December 16, 2015

The California Bureau of Real Estate Appraisers is sadly yet another example of a state agency that does not really understand what the taxpayers expect of it. The taxpayers probably assume the agency in charge of licensing appraisers in California would certainly not renew the license of an appraiser who not only is indicted in a multiparty, multi-million dollar mortgage fraud case, but actually pled guilty to at least one count of the crime. Unfortunately, that assumption would be incorrect. The following is a summary of the case in question. We have changed the names of the parties to protect the innocent though we find it difficult to label anyone involved as “innocent”.

In August of 2011, the US Attorney filed criminal charges (based on an indictment issued by a federal grand jury) against 26 individuals involved in alleged wire fraud in a mortgage lending scheme relating to numerous loan transactions in 2006 and 2007. Some of the allegations involved one or more real estate appraisers then licensed by the State of California. Sometime in 2012 the San Diego Union Tribune reported that 5 of the original defendants pled guilty to one or more of the charges, including one of the appraisers. In that article the Union Tribune referred to a section of the indictment which referenced an email from the appraiser in question where the appraiser offered to push the value higher in an appraisal if necessary to make a deal work. The appraiser in question technically pled guilty to making false statements about his income and assets when applying for a loan (or loans) in his own name as part of the alleged scheme to defraud several lenders.

Since we place E&O insurance for real estate appraisers in the State of California, we looked up the appraiser in question and discovered he had purchased his E&O insurance through our company. Immediately we notified the insurance carrier what we had learned and then looked up the individual’s license status with the BREA. Surprisingly, we learned that not only was the appraiser still licensed, his license was shown as being in good standing with no investigative or disciplinary proceedings against him. In fact, we learned his license had actually been renewed once by the BREA while he was already under indictment and possibly after his guilty plea was announced. We next called the BREA and inquired how someone involved in mortgage fraud could have an appraisal license renewed and we learned that license renewal is basically a ministerial act which requires the licensee to have an active license in good standing, be current on all required CE, and pay a renewal fee. Apparently, the license renewal process does not require a license holder seeking renewal to answer any questions relating to activities which might relate directly to their competency to continue to hold a license. According to the BREA a separate disciplinary action is commenced after the license renewal at which time appropriate action is taken. It seems to us that taking the action at renewal is both more efficient and logical, but we are dealing with a state agency here. At this time, we sent the BREA a copy of the Union Tribune article putting the BREA on notice of the indictment and guilty plea.

After we notified the BREA of the appraiser’s guilty plea in 2012, we never gave the matter another thought. Recently when the guilty plea of another appraiser charged in the same case was announced we checked to see if this second appraiser’s insurance was placed by our company. Once again, we learned it was and again we notified the carrier in question. We also checked the BREA website and found this appraiser’s license history contained a record of disciplinary action taken by the BREA. Then, purely out of curiosity, we decided to check the first appraiser’s license record to see what action the BREA ultimately took after we notified the BREA of the guilty plea in 2012. Imagine our surprise when we learned that his license had been renewed again in 2014 and his disciplinary file contained nothing about the guilty plea. After exchanging email with the BREA staff, we filed a public records act request seeking additional information. When the response arrived we were astonished by the documentation enclosed. It showed the appraiser in question received a slap on the wrist (aka a citation) which doesn’t even go into his state license records. All he had to do to retain and renew his license again was to pay a $1000 fine. We subsequently learned he has in fact renewed his license again for 2016.

Not being satisfied with this outcome, we submitted a second public records act request and this time we asked for any and all information obtained from any source and used by the BREA in making its determination not to even note this matter in the appraiser’s license file. We honestly were hoping there was something in the BREA file from the US Attorney’s office offering mitigating circumstances or some tangible reason why this appraiser got off with less on his record than many appraisers the BREA “investigated” between 2008 and 2015 as a result of the real estate downturn. Many of those appraisers were ordered to pay large fines, do extra CE classes, and were placed on probation or had their licenses suspended for some period of time. In other words, we wanted to know why the BREA was not sinking its teeth into this appraiser the same way it had gone after so many appraisers who allegedly may have used a bad comparable sale in an appraisal even if the allegedly bad comp did not change the conclusion of value.

Sadly, when the response to this request came back to us from legal counsel for the BREA, it recited a number of exceptions to the government code section concerning public records act requests and BREA declined to produce anything at all. Among the exceptions cited was a reference to a section excepting records from state or local agencies involved in investigatory matters, including law enforcement agencies. During a subsequent conversation with the attorney in question, we asked why this exception applied to federal agencies since the statute only referenced state and local agencies. His reply was that in spite of wording to the contrary the exception included all investigative information no matter what the source. Upon realizing this discussion was going nowhere fast, we informed the attorney we planned to:

a) write this article/blog to spread the word far and wide by posting it anywhere and everywhere appraisers, mortgage bankers, and consumers might be found,

b) send a copy to the Governor’s office so his staff can follow up with the BREA about why this appraiser still has a license,

c) send copies to every newspaper or journal that ever covered appraiser issues,

d) send a copy to the Appraisal Subcommittee and the Appraisal Foundation so they are aware how the BREA handles appraiser disciplinary matters in California,

e) send a copy to Senator Hueso’s office since we previously asked that office to look into the severe and career damaging disciplinary actions given to appraisers in 2008-14 for what we saw as minor issues (at least none of them pled guilty of a federal crime), and

f) send a copy to Speaker Atkins office so she is aware the BREA thinks it is OK to issue appraisal licenses to California appraisers involved in mortgage fraud.

We find it totally inconceivable the BREA thinks it is acceptable to let an appraiser who engaged in mortgage fraud remain licensed and in good standing with nothing of record to alert lenders or consumers before they hire this appraiser to do an appraisal.

We invite you to join us and sound off and let the world know how you feel about the action or should we say inaction of the BREA in this matter. We say enough is enough and it’s time the people who are supposed to protect the residents and businesses of this state do their jobs the right way.

The BREA: 916-552-9000

Governor Brown: https://govnews.ca.gov/gov39mail/mail.php

The Appraisal Subcommittee: https://www.asc.gov/Pages/ContactUs.aspx

The Appraisal Foundation go to: info@appraisalfoundation.org

Senator Hueso: http://sd40.senate.ca.gov/contact/email or call 916-651-4040

Speaker Atkins: https://lcmspubcontact.lc.ca.gov/PublicLCMS/ContactPopup.php?district=AD78 or call 916-319-7722

Author: Brian L. Trotier, JD, is the Executive Vice President and Chief Operating Officer of FREA and a former practicing attorney with more than 30 years experience in real estate and risk management.

Comments

Thanks for bringing the matter to our attention. I feel that this kind of action or inaction by BREA has a negative impact on the appraisers in California, I have had personal issues with BREA staff with them retaliating toward me for challenging them when they were incorrect. In their dealing with me they violated their own policies, procedures and regulation and this cost me additional money and time. I had to go directly to the head of OREA (now BREA) to make them communicate with me and process my request. If anybody wonders why we the people distrust the government, this is a good example. John Pratt

BREA has many issues and the lack of staff in many ways leads to the poor public service they provide. Then should you as an appraiser in the real world get to talk to an appraiser on the staff you quickly find out why. The BREA staff appraisers you talk to have not done an appraisal in the real world for 10 years or more. They are not up to date on Fannie Mae or FHA/HUD, but they can quote USPAP back to you. The issue with that is they can quote it to you, but have only a fair understanding of how it comes into play in the real world.

And as you point out, they will drop the hammer on you if they feel you left out a better comparable sale from your report than one they picked. This is to show just how well in touch they are with the local properties in your area even as they are hundreds of miles away in Sacramento.

But, California is a BLUE state, so you can not take any thing away from some one here as the government is there to provide equal everything to everyone so that no one feels bad regardless of what they did in the past

I am long out of this cesspool of a business known as residential appraisal and thank god for that. How anybody in his right mind would do an AMC home appraisal and take on all that liability for 175 smackeroos is beyond me. No wonder all this fraud is going on; you can't make an honest living in this field in any meaningful way! This is truly the nail in the coffin for this industry and a perfect example of the peter principle in action for the bureaucracy. It's punish the innocent and reward the guilty as usual. Not surprised in the least. Renewal fee revenue and continuing education fees before all else and know your USPAP! At the BREA or whatever it's currently called above all else confusion reigns.

This article only underpins complaints submitted to BREA since it was OREA. In years past they have wanted the Appraiser submitting information regarding possible fraudulent activity to swear to its validity so they would not need to do their own investigation. Pointing out that it was their responsibility to authenticate the claim independently to protect the reputation of a possibly wrongfully reported Appraiser made no difference. Without the submitting Appraiser swearing to the accuracy no investigation could, or would, move forward. Similar experiences have been had by to many very good Appraisers who have tried to get something done about a few over zealous folks in the field.

Boy is this totally bizarre considering that CA is one of the most active states with consumer protection (or so I thought). In TX I think there are been instances of the agency taking "emergency" action against some appraisers in similar situations. And TX where I'm located is not known as being particularly active in consumer protection from what I've read.

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