The role of appraisals within mortgage audits is to complete an overall picture of what happened. While an experienced mortgage auditor may be able to determine likely appraisal fraud without even seeing the appraisal, it is still highly beneficial to confirm the specificity of the appraisal fraud when the mortgage audit is designed around being the basis for a lawsuit.
The overall mortgage documents and borrower story often paints a picture of what happened, however in cases of inflated sales prices, the appraisal provides both a timeline, a duty, and specific evidence as to how the inflated sales price was justified. The appraisal is the glue that holds everyone else’s plan to sell the home at an inflated price together, and as such, must reflect each party to the plans exact requirements.
The appraisal is used multiple different ways in a purchase transaction. Such as…
- To justify the purchase price
- To value and asses loan risk
- To double check chain of title from the title company
- To assess the value of the property by the lender to set the loan limits
When you understand how it is used, you then realize that the appraisal does not stand alone. Our mortgage audit process reflects this and we review the appraisal multiple times with other loan documents.
We have found that inflated appraisal value aside, appraisals in fraudulent transactions are often constructed specifically and exactly as needed to justify other sections the loan application and loan file.