Appraisal Red Flags For Bank Examiners When Reviewing Appraisals

- No appraisal or property evaluation in file.
- Mortgage broker or borrowers that always use the same appraiser.
- Appraiser bills association for more than one appraisal when there is only one in the file.
- Unusual appraisal fees (high or low).
- No history of property or prior sales records.
- Market data located away from subject property.
Unsupported or unrealistic assumptions relating to capitalization rates, zoning change, utility availability, absorption, or rent level.
- Valued for highest and best use, which is different from current use.
- Appraisal method using retail value of one unit in condo complex multiplied by the number of units equals collateral value.
- Use of superlatives in appraisals.
- Appraisal made for borrower.
- Appraisals performed or dated after loan.
- Close relationship between builder, broker, appraiser, lender and/or borrower.
- Overvalued (inflated) or high property value.

Office of Thrift Supervision May 2010 Examination Handbook 360.1

Hiding Appraisals from Regulators is Not a Good Idea

What was this guy thinking?

A former executive at the failed Bank of Clark County is scheduled to be sentenced today in Tacoma, Wash., for hiding information from Federal Deposit Insurance Corp. examiners.

David S. Kennelly, who was chief credit officer until he was fired in November 2008, pleaded guilty on Feb. 19 to a felony scheme to conceal a material fact. In his guilty plea, he admitted to hiding appraisals on 23 real-estate backed loans that revealed looming problems at the Vancouver-based bank. Federal prosecutors have asked U.S. District Court Judge Robert J. Bryan to sentence Kennelly to six months of incarceration, probation and a $10,000 fine

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