Inflated numbers: Are builders, lenders and appraisers working together?

by: Jim Strickland Updated:

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A local banker is blowing the whistle about what he calls improper dealings in a metro subdivision.        

One official told Channel 2 Consumer Investigator Jim Strickland that on the surface, it smacks of the housing crisis all over again.

Defaults on big-dollar loans made on overpriced houses helped trigger the foreclosure crisis eight years ago.

In a new Forsyth County subdivision, new homeowner John Laymac says he fears he and his neighbors could fall into the same trap.

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He showed Strickland a paper trail.

Laymac is a loan officer, and was days away from closing on his $390,000 home. Then, an appraiser figured the value at only $365,000. Because of that, the bank where Laymac works denied his mortgage.

"They were doing what a bank is supposed to do. They were setting the loan amount based on the correct valuation," Laymac said.

Laymac showed Strickland an email from his builder.

"And he said, ‘I want you to go with my preferred lender, Brand Mortgage. They've never had a problem getting the value needed,’" he said.

In a filing with federal regulators, Brand Mortgage admits it has partial ownership of its own appraisal firm, Valuation Management Group.

VMG dispatched a different appraiser.

"And they came back with a value $25,000 higher than the original appraisal. The same as the sale price, coincidentally," Laymac said.

The first appraisal counted nine rooms and 3,069 square feet. The new appraisal claimed 10 rooms and added 156 square feet. 

Laymac told Strickland his kids faced immediate disenrollment from their Forsyth school if he failed to buy a house. 

He chose to close and pay extra.

"Twenty-five thousand dollars. Extrapolate that over 30 years, close to $50,000,” he said.

The builder, SR Homes, and Brand Mortgage refused on-camera interviews, but denied any wrongdoing.

Valuation Management Group and the two appraisers wouldn't talk to Strickland.

So Strickland called 30-year veteran appraiser Beryl Tylar to look at each appraisal. 

She noticed the square footage and more.

"The reason, in my opinion, that there is such a big variation in the two bottom lines is because of the comp selection, and that is a biggie in appraising," Tylar said.

The higher appraisal uses a comp sale of a home that costs $80,000 more than Laymac's.

"Personally, I would not have used it," Tylar told Strickland. 

She said there was an entire subdivision of more appropriate comps.

Tyler added that the paperwork looks suspicious, but is not proof the appraisal Brand Mortgage received was wrongly inflated. 

"It doesn't have to be an impropriety. The appearance of impropriety sometimes is enough," Tylar said. 

Laymac said he's not the only one affected because his home is now a comp sale.

"So, yeah, it ripples through the entire neighborhood," said Laymac.         

Standard and Poor's reports Atlanta metro home prices since November are up just 0.3 percent. 

But real estate listings for Layman's neighborhood show since his closing, five-bed, four-bath home prices are up 7 percent.

Brand Mortgage responded to a complaint Laymac filed with federal banking regulators, in which they disclosed ownership in the appraisal company.

They also said it’s not their policy to look at another bank's appraisal before hiring a second appraisal company.

Laymac has also filed complaints with the state's Department of Banking and Finance and the appraisal board, but those bodies are secretive, so even if they took any action, they wouldn't make it public.