Senate Banking & Financial Institutions Committee passes mortgage fraud bills
Thursday, March 29, 2007
LANSING - The Senate Banking and Financial Institutions Committee today passed legislation sponsored by Sens. Randy Richardville, R-Monroe, and John Pappageorge, R-Troy, to help prevent mortgage fraud in Michigan.
"Mortgage fraud is a serious crime which we have been hearing about a lot lately," said Richardville, chair of the committee. "This type of fraud is very complicated and involves many issues, including appraiser coercion."
To address this issue, Senate Bill 342 will prevent real estate appraisers from developing an appraisal based on a client's precondition about the appraisal's outcome. Furthermore, Senate Bills 343 and 356 will prohibit professionals from coercing or inducing a real estate appraiser into inflating the value of real property used as collateral for a mortgage loan.
John Taft III of Taft Appraisal Services, Inc. in Monroe testified in support of the legislation. Taft emphasized that these bills will make it clear to all professionals that lender pressure is not an acceptable practice and that there are consequences involved.
"Michigan's declining real estate market has increased the amount of pressure placed on lenders," said Taft. "Appraisers are not blameless in this issue with their livelihood based upon referrals and repeat business. It is difficult to acquire clients who are looking for a true market value appraisal. Hence, many appraisers have succumbed to lender pressure of one form or another."
In Michigan, lenders lose at least $29 million a year to mortgage fraud. The criminal transactions that can occur between the lender, often a mortgage broker, and the appraiser, financially and emotionally devastate innocent homeowners.
"Appraisers are often asked to assess real estate based on predetermined values in order to receive future work," said Richardville. "We know not everyone engages in these fraudulent appraisal activities. These bills will help catch those who do and prohibit certain coercive acts so that Michigan's appraisers can continue to provide independent assessments that are fair to both the lenders and the borrowers."
The bills will now advance to the Senate for consideration.
Editor's note: A photograph of Sen. Richardville and Taft at the Banking and Financial Institutions Committee meeting is available on the Senate Majority Photowire, located at: http://www.senate.michigan.gov/gop/photowire/Index.htm.
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