In 2007, a mortgage lender flagged the work of veteran Florida home appraiser Jerome Woolf for review, a process that often leads to an appraiser losing a lender’s business — a potentially disastrous financial hit for a small businessman like Woolf.
The review paperwork confused Woolf. His signature was on the original appraisal, but the home was in St. Lucie County. Woolf never worked that far north on Florida’s Atlantic coast.
Woolf suspected Serge R. Wainer. A year before, Wainer had worked for Woolf as an appraisal trainee. Woolf described his former apprentice as a middle-aged man who bristled under his oversight, often performing incomplete and inaccurate appraisals.
Convinced Wainer swiped his digitally scanned signature and fixed it on the appraisal, Woolf reported the incident to the police and the Florida Department of Business and Professional Regulation.
Wainer, who could not be reached for comment, never faced criminal charges. The Florida Real Estate Appraisal Board, however, found him guilty of ten violations of the state statute regulating appraisers, including making a false report and one count each of misrepresentation, dishonest conduct, culpable negligence or breach of trust in a business transaction. Wainer waived his rights to dispute the complaint.
The board revoked Wainer’s trainee license, but the real estate community was not rid of him. Neither were Florida homebuyers.
Like many appraisers in Florida and other states hit hard by the foreclosure crisis, Wainer held a real estate broker and sales license along with his appraiser’s trainee license. Banned from performing appraisals, Wainer hung his hat at a real estate agency and began selling homes.
A Center for Public Integrity investigation of the appraisal industry in California and Florida, two of the states hardest hit by foreclosures, found that since 2005, one in six appraisers whose licenses were revoked or surrendered kept their real estate sales or broker’s licenses. The violations that led to these appraisers losing their licenses ranged from simple incompetence to fraud committed for personal financial interest. Yet they slipped through the cracks of a loosely maintained system of state oversight, which allowed them to continue working in the real estate industry negotiating sales to home buyers, who likely know little about their pasts.
Industry insiders believe the number of these former appraisers still in real estate is in the hundreds nationwide, but an accurate figure is elusive given the patchwork of agency oversight. “There’s a lot more that you are never going to find,” said Pamela Crowley, who runs the website Mortgage Fraud Watch List. “Those of us who have been active in trying to police our own have come to the conclusion that our policing agencies don’t want that.”
In several cases, banned appraisers also remained in the appraisal industry, taking high-level positions in appraisal management companies, the increasingly prevalent and often unregulated third-party companies that link lenders with independent appraisers.
California and Florida authorities concede they dropped the ball: in most cases, they say, a violation serious enough to lead to an appraisal license revocation should also result in a lost realtor’s license. Yet the dual-licensing bureaucracies did not always exchange violation information. And when they do, the process of taking a license is not automatic — violations against each license must be investigated independently.
And that’s the way it should be, said Thomas O’Bryant, director of the Florida Division of Real Estate. “Everybody is afforded under law due process rights. We are not going to trample on those due process rights as we move through those processes.”
Veteran appraisers say although most members of their ranks are ethical, former licensees who move from one facet of the real estate industry to another give the industry a bad name. The problem, they say, stems from fragmented state bureaucracies, divided regulation of the real estate industry, and poor communication between regulators.
Crowley of Mortgage Fraud Watch List said appraisers sometimes face unfair punishment, but in most cases, states have a high threshold for revoking a license. She thinks the loss of an appraiser’s license should automatically trigger the loss any related licenses: “Why bother licensing if you are going to allow them to keep hopping from one to another and keep doing the same unethical things that harm our people, harm our consumers, harm the economy?”
Working all sides
By comparing Florida and California state lists of revoked appraisers to lists of currently licensed real estate agents and brokers, the Center identified 19 people who lost their appraisal licenses since 2005 but kept their broker or sales licenses. Ten of the cases were in California; nine were in Florida. During that period, California revoked or accepted the surrender of 60 appraisal licenses, while Florida revoked or accepted the surrender of 54, according to data from the Appraisal Subcommittee, an independent federal agency that oversees state licensing. It’s unclear how many of those cases were referred to related licensing boards for review.
Ira C. Gluck is one of the Californians. Gluck surrendered his appraisal license in 2007 following charges that he prepared two inaccurate, misleading, and deficient appraisals and, more seriously, that he falsely certified that he had no financial interest in properties he appraised. According to the formal accusation filed in the state’s case, Gluck acted both as an appraiser and as a loan agent for North American Financial Services in Simi Valley outside Los Angeles, and tried to lure an appraisal customer to apply for loans at the company.
Industry insiders believe the number of former appraisers still in real estate is in the hundreds nationwide.
Gluck still works for North American Financial Services. Reached by telephone, Gluck said he now sells real estate. Gluck does not think losing his appraisal license should disqualify him working in real estate. In fact, he says he should not have lost his appraisal license in the first place.
“I was an appraiser for 18 years,” he said. “It was my sole income. In my opinion, I believe the punishment did not fit the circumstances.” When asked about his alleged conflict of interest in the two homes he lost his license over, Gluck declined to comment.
Bob Clark, director of California’s Office of Real Estate Appraisers, said the state has more licensed appraisers than any other state — more than 16,000 — but noted that this is not an excuse for the lack of communication between his agency and the California Department of Real Estate, which regulates real estate sales and broker licenses.
“We dropped the ball,” Clark said when asked about the 10 former appraisers working as licensed realtors in the state. Further, he said he was not sure if his office routinely passed on information about every appraisal discipline action to the Department of Real Estate.
Clark added that his office will review its policies to make sure the information is shared in the future. “If someone’s license was revoked, I would want to know. It indicates a possible lack of ethical standards,” he said.
But he also acknowledged that just because an appraiser loses his or her license, that does not automatically mean the Department of Real Estate will revoke other licenses. “A violation of an appraisal law does not always indicate that they have also violated real estate law,” he said. “But perhaps they have.”
In many cases, a revoked appraisal license would cause a real estate agent or broker to lose their license, especially if the charges included fraud, said William Moran, assistant commissioner of enforcement at the California Department of Real Estate. Moran said the two agencies have a policy to exchange information about license disciplinary actions, but that their computers systems are not linked up. “It requires a human being to follow up on that step,” he said, adding it was not clear if that step occurred in the cases identified by the Center.
The Florida disconnect
After Florida revoked Serge Wainer’s appraisal trainee license, Wainer started selling real estate. Since 2007, he has worked at several agencies, often marketing the cut-rate foreclosure sales and short sales now prevalent in the collapsed Florida market.
When the Center for Public Integrity caught up with him in May, Wainer was selling houses for Elegant Homes Realty, a small agency in Fort Lauderdale. Wainer did not return repeated phone calls to his home and office. Courtney Dixon, Wainer’s boss at Elegant Homes, proved more interested in discussing his employee’s past.
“I knew nothing about that,” Dixon said, when told Wainer’s story. “Had I got that story, I would not have hired him.”
Dixon said he knew Wainer had worked as an appraiser but assumed he had given up that license to become an agent. Dixon said he does not look at a prospective employee’s records in other industries, so he had no idea that Wainer had lost his appraisal license.
“No, we check on the real estate license, to see the status on that license,” Dixon said. Contacted in June, Dixon said he fired Wainer because of his record.
Representatives of the Florida Division of Real Estate, which oversees the boards that regulate real estate agents and appraisers, were surprised to learn about the cases of Serge Wainer and others like him. Department policy should have led to Wainer losing his real estate license, officials say. The policy did not work.
“If someone’s license was revoked, I would want to know. It indicates a possible lack of ethical standards,” Clark said.
O’Bryant, director of the Florida Division of Real Estate, declined to speak about Wainer’s case but said that as a matter of policy all revoked appraisal license cases are reported to the Florida Real Estate Commission, which has the authority to revoke real estate licenses.
Ralph McCoig, chair of the Florida Real Estate Commission, said the commission investigates all complaints reported from the Division of Real Estate. “If they had their [appraisal] license revoked, typically that would call for a revocation of the real estate license,” McCoig said. Using another person’s signature on official documentation would be grounds for removal, he added.
The case of Wainer and the eight other former appraisers who hold real estate licenses in the state suggests otherwise. Asked to explain the gap between the policy and practice at the Florida Real Estate Commission, McCoig was stumped. He pointed to the number of law breakers the state is up against. “Florida is one of the leading states in mortgage fraud,” he said.
One case in which the Florida Real Estate Board took action against a realtor charged with “incompetent, negligent, dishonest, or untruthful” conduct in his appraisal business ended with a slap on the wrist. Longtime appraiser Frank P. Giza lost his appraisal license, but he kept his broker’s license.
Giza says he appraised Florida homes for more than two decades when he surrendered his license in 2006 over a bungled appraisal at a motel in St. Augustine. It was his second offense.
Giza says, rather than fighting the state over his appraisal license, he turned over his business to his son (though his name is still on the business website as an appraiser, and he still performs appraisals for non-loan informational purposes) and set out for greener pastures near the beach at Ft. Myers. He said he is now working with locatehomes.com, a web-based real estate company that helps connect buyers with homes under foreclosure.
“I’m with a company that can provide me with as many pre-qualified listings as I can handle,” Giza said, referring to buyers who have qualified for bank financing and are ready to purchase. “I’m telling you… this is like shooting fish in a barrel. This company is awesome.”
Giza said he doesn’t think his past record as an appraiser accused of wrongdoing should keep him out of the real estate industry. Giza said the state tried to take his real estate broker license, but failed, though he did wind up on probation. “I’ve done nothing against my broker’s license,” he said.
Untouched by regulators
As the Center showed earlier this year, in a previous appraisal industry investigation, “The Appraisal Bubble,” hyped appraisals helped inflate the real estate market, contributing to the market’s collapse. To stem the problem of lenders pressuring appraisers to “hit the numbers” — that is, inflating home values to justify large mortgages — Fannie Mae and Freddie Mac in May adopted new rules that ban the once common practice of lenders communicating directly with appraisers during the appraisal process.
Called the Home Valuation Code of Conduct, the agreement between the two lending giants and New York Attorney General Andrew Cuomo pushed much of the appraisal business to appraisal management companies, supposedly independent third parties who match appraisers with lenders and take a fee from the process.
Appraisal management companies remain unregulated in all but three states, according to the Appraisal Institute, an appraisal industry trade group. And evidence from California and Florida shows that like real estate companies, the appraisal management industry also employs appraisers who lose their licenses. The numbers are unknown: since appraisal management companies are not registered by state regulatory departments and workers do not require licenses, employees are difficult to track.
Appraisal management companies are “the wild, wild West,” of the industry, said Clark, director of the California Office of Real Estate Appraisers. “I believe that something has to happen to make them accountable because they are not right now and that’s a problem,” he said.
The companies are facing new regulatory laws by state legislatures and Congress. The Mortgage Reform and Anti-Predatory Lending Act, which passed the House in May and is before the Senate Committee on Banking, Housing, and Urban Affairs, includes provisions that would place appraisal management companies under the regulatory jurisdiction of states and disqualify appraisers who lost their licenses from taking high-level position in the companies. Industry sources say they expect the bill to come to a vote in the Senate by October.
Congressman Paul Kanjorksi, the Pennsylvania Democrat behind the appraisal provisions in the bill, has long pushed to tighten up regulation of the industry. “The current economic crisis has made it clear that no participant in our financial markets, including appraisal management companies, can continue to operate in the shadows of our marketplaces. Everyone needs some form of oversight,” Kanjorski wrote in response to Center questions.
The legislation would likely shove former appraisers like Laurence I. (“Larry”) Holzer out of the business. Holzer lost his Florida appraisal license in 2007 over 11 alleged violations in one appraisal performed by a trainee he failed to supervise. Holzer now runs Global Appraisal Solutions, an appraisal management company in Clearwater.
Contacted by telephone, Holzer saw no reason why his appraisal past should disqualify him from working in the real estate industry. “Absolutely not,” he said. Holzer declined to comment further about his case.
Critics remain dubious that state or federal legislation will remove discredited appraisers from the appraisal management industry. Proposed legislation prohibits appraisers who lost their licenses from owning or running appraisal management companies, but it says little about them working for the businesses. Corrine Villalobos lost her California appraisal license in February, accused of gross misrepresentation of market conditions, targeting a predetermined value, and other violations. The charges stemmed from an inflated $625,000 appraisal she gave on a Santa Ana home.
The former appraiser is now listed as the “administrator” of Integrity Appraisal Management, Inc., an appraisal management company in El Monte, California.
Contacted by telephone, Villalobos said administrator means secretary. She said she has nothing to do with appraisals. Villalobos also said she turned in her appraisal license because the cost of fighting to keep it was too high.
“It looks a lot worse than it was,” she said. “I really got screwed in the whole thing.”
A month after an investigation led Villalobos to turn in her license, Clark, the Office of Real Estate Appraisers director, referred to her case in The Orange County Register as a success story: “We’re very serious about getting the bad apples out of the barrel.”
But as the case of Villalobos and other sanctioned appraisers shows, catching bad apples does not force them out of the industry.
When he learned about Villalobos’ new job, Clark wasn’t surprised. “If someone reported her right now, we can do nothing about it,” he said. “AMCs are not subject to our jurisdiction.”