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Just like the rest of the country, in Florida it is extremely important to be able to trust your real estate appraisal because appraisals, compiled by appraisers that are depended upon by many, many people to be responsible, thorough, knowledgable, and honest, give the bottom line on how much a piece of property (house, condo, townhome, undeveloped land tract, office building, whatever) is worth.

No one looks at the land, the improvements, the neighborhood, the roadways themselves in a real estate transaction; instead, they look to paperwork provided to them by a real estate appraiser.  What the appraiser reports for fair market value is taken as accurate and true.

Which is why appraiser fraud and appraiser negligence – particularly rampant (or at least it sure seems to be) here in Florida – is serious and far-reaching.  Consider the news out this week: Quality Mortgage Services (a Tennessee quality control company) has announced the results of its audit, and it appears that banks and financial institutions have been using flawed and fraudulent appraisals in order to boost their buy-backs of mortgages.

Appraisal Fraud: Low Ball Appraisals Because The Banks Want Low Values – FRAFing

What’s going on?  The banks and mortgage lenders are putting the screws to appraisers and forcing them to use market data that isn’t the best data to be used for accuracy but is the best data to use to monkey with the value of the property that is supported by that bank or mortgage lender’s mortgage.  It’s happening so often they’ve even got a nickname for this con job:  it’s called “FRAFing,” for “field review appraisal fraud.”

FRAFing means that the bank has a certain number that it wants for the value and the appraiser is pushed to manipulate the market values in order to get the lender the property value number that it wants.  Period.

And what they want is a lowball number.  In FRAFing, higher comparables are ignored.

What is a Mortgage Buy-Back?

Years back, when the housing industry was blowing and going, banks would make home loans and then they would sell those loans to other banks, to private investors, or to quasi-government agencies like Fannie Mae and Freddie Mac.  Historically, the bank that made the home loan kept it and that is where monthly mortgage payments were paid; things changed.  A big part of the housing crisis stems from this eureka! in the financial sector, where they discovered money could be made (lots of money) by that bank selling those home loans to others – they are assets on the books, after all.  (For details, read our free ebook on Foreclosure Fraud that explains things.)

Now, in a mortgage buy-back, the bank that made that home loan and sold it is being asked to buy it back. Why?  The mortgage is in default.  The buyer of that mortgage thinks it’s a lemon and is going back to the seller, demanding the seller to take the darn thing back.

A big bank that is getting asked to buy back mortgages?

Bank of America.  Bank of America has been asked to buy back huge (HUGE) numbers of home loans sold to others, to the tune of $16 billion in total buy-backs.

Fannie Mae and Freddie Mac alone asked Bank of America to take back $2,000,000,000.00 in home loans that they bought before the bubble burst.  Private investors’ buy-back requests total much, much higher.   Lots of these mortgage buy-back claims aren’t really Bank of America originations, though: they are home loans that were originally made by Countrywide – but Countrywide was in big, big trouble back in the Fall of 2007 and Bank of America came in like the cavalry in January 2008 and bought Countrywide. And in that purchase, Bank of America bought all these mortgages that Countrywide had made and sold and now the buyers want to give them back.

No, no one is saying here that Bank of America is involved in FRAFing.  No.  Bank of America is a big, huge example of mortgage buy-backs in the United States today — and a clear example of what this means.

In May 2012, Bank of America did agree to buy back $300 million in mortgages from Freddie Mac.  How to deal with the Countrywide fiasco has been the subject of settlement negotiations, and this deal was part of it.

Yesterday, meanwhile, Fannie Mae and Freddie Mac announced that they are changing the rules regarding mortgage buy-backs, and they aren’t going to be asking a bank to take back a mortgage if there have been 3 years (36 months) of consecutive, timely monthly mortgage payments on the home loan.

Larry Tolchinsky’s Tip:

Sure, this is fighting between banks who made home loans and banks or agencies that were so happy to buy them back before the bottom fell out of the economy.  Foreclosure defense attorneys and Florida homeowners who have been foreclosed upon, who are fighting with banks now to modify their mortgage, or those trying to short sell their homes – well, not much sympathy here for who gets hurt in a mortgage buy-back fight.

However, the bigger issue here is how in the midst of this fight there appears to be continued lender evildoing. Prodding, pushing, or overpowering real estate appraisers to give a bank the number it wants for a real estate value, instead of the correct and true value for the home – well, that’s just continued bad acts by the banks and mortgage lenders.

True, the appraisers are at fault for failing to do their job.  Appraisal fraud is a serious thing.  But more telling in what is happening here — many lenders are simply untrustworthy today.  There are banks out there who just aren’t respecting the law.

And its the smart and savvy Florida homeowner who gets an experienced Florida real estate attorney to advocate for him or her when dealing with these parties.

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at, or (954) 458-8655

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