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Some appraisers object to filing data with city

Some home appraisers object to a new city law, intended to combat flipping, that requires them to tell Baltimore officials which properties they've appraised and for how much.

Most residential appraisals performed in Baltimore during the past year - including how much the property was appraised for - are listed in a databank kept by city officials.

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A law that was passed in 2003 now requires appraisals done on residential city properties - including refinancings - to be reported by appraisers quarterly to the Baltimore Department of Housing and Community Development.

In the past, the information was not reported to government agencies and was kept confidential between appraisers and their clients.

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The purpose of the law, according to the Maryland Association of Appraisers Inc., is to help detect patterns or trends that may indicate fraudulent or questionable appraisal practices and to provide an audit trail back to the appraiser. It was one of the recommendations of the Baltimore City Flipping and Predatory Lending Task Force in 2003.

But some appraisers say the information is a breach of contract between them and their clients. And they wonder if the information could be used for other purposes.

"If I'm not doing anything wrong, I shouldn't be required to report that information to the city," said Jan Ramsay, an appraiser with Canton-based Ramsay, Williams and Associates. "I believe most appraisers feel that way and the general public is going to feel that way."

But city leaders and members of a city task force aimed at wiping out the Baltimore flipping problem have said the new rules already are improving the problem.

"Some appraisers are in the middle of this and have breached their professional integrity and responsibility," William Riedel, legislative liaison for the Maryland Association of Appraisers, said of the flipping scandal. "So the appraisal profession has got to be in the forefront of helping to fix the problem."

The law requires appraisers to report the address, date of appraisal and appraised value for one- to four-family residential properties examined for mortgage underwriting purposes in Baltimore.

Appraisals for settling estates, establishing asking prices, assisting a buyer in preparing a bid, supporting litigation or other nonmortgage-related purposes are exempt.

The information is sent to the state's Commission of Real Estate Appraisers and Home Inspectors, where it is filed in a database. It is then sent to the city's Department of Housing and Community Development. The city has collected information on 3,555 appraisals - two quarters' worth of data.

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Before the new law, "there was no quick and easy way to say who appraised a property," said Ken Strong, director of the city's Office of Homeownership in the Department of Housing and Community Development. He is responsible for the appraisal database.

Strong said one alternative to the current plan was to add the appraiser's name to the HUD-1 form, which is used at settlements to itemize charges imposed on borrower and seller for a real estate transaction. The form names the parties involved in the transaction except that of the appraiser.

Detect patterns

Strong said amending the HUD-1 form would not be an easy change to make. It also would provide only an individual's name, whereas the new data include the individual link and enough data to track patterns.

"It's clearly a benefit to the public for law enforcement purposes and regulatory enforcement purposes that we have this data so we can effectively be a watchdog on the honesty of appraisers," Strong said.

But Sharon Cremen, of Forest Hill-based Cremen Appraisal and Consulting, contends the city is asking for the wrong information. As a frequent court witness on flipping and fraud, Cremen said, the sales price - something that already is public information - is the information they need.

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"That [appraisal] information is only good for the tax assessment department," Cremen said. "In investigations you find that either the players start coming up over and over again or the sales prices in a particular neighborhood are inflated."

She said there are just too many unanswered questions about the new law.

"They haven't really told us what they are going to do with this information except to say it will be used to look at flipping," Cremen said.

Property flipping involves the quick purchase and resale of houses at falsely inflated values. Many buyers of these properties have ended up losing their homes to foreclosure because mortgages were worth more than the homes. In the late 1990s, a property flipping scandal in Baltimore caused foreclosure rates to skyrocket, resulting in millions of dollars in losses.

In 2000, a task force was formed to help find solutions to the flipping problem in the city. The task force includes representatives from the federal Department of Housing and Urban Development, law enforcement, community activists, Realtors, appraisers, mortgage bankers and foundations.

Supporters of the measure said flipping can't happen without a false appraisal.

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Prosecution tool

"There was the feeling there needed to be some kind of a record of who appraised what in the city," said Riedel, of the appraisers association. "Consumers will not be affected at all, other than it will be a tool for the attorney general to make it a little easier to effectively prosecute flipping cases."

The database already has been put to use. Strong said law enforcement agencies have asked for the information and he has provided it in a few cases. He declined to be more specific.

The information is available for inspection only to representatives of government agencies for investigation of fraudulent practice, according to the law. It is not public information and cannot be obtained through the Freedom of Information Act.

The disclosure requirement is consistent with the confidentiality rules of appraisers, which specifically permit disclosure to "state enforcement agencies and such third parties as may be authorized by due process of law," according to the Maryland Commission of Real Estate Appraisers and Home Inspectors.

Property flipping in Baltimore declined by 82 percent between 1999 and 2003, according to the Community Law Center, a Baltimore group that helped form the task force.

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The task force determined that, while all professionals involved in real estate and lending should be regulated more fully and aggressively, appraisers are a critical part of the problems of flipping and mortgage fraud.

"The appraiser became a crucial element in this whole process," said Diane Cipollone, co-coordinator of the task force for the Community Law Center and director of research and policy. "Doing something that would stop the false appraisals from being produced became a major focus of the task force, as well as identifying and prosecuting different people involved in the transaction."

Also, at the request of the task force, the Maryland Association of Appraisers developed a two-day course on appraising urban properties and how to avoid, even inadvertently, becoming part of a flipping scheme or mortgage fraud.

Bob Robidoux, president of the Maryland chapter of the Appraisal Institute, said he was "barraged" by phone calls when the law was passed last year.

"This was a very, very important issue," Robidoux said. "It sets a precedent that people are concerned about. When people buy a product from us they have an expectation of confidentiality. That's a primary mandate of our ethics."


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