APPRAISER IDENTITY THEFT

Identity theft has been recognized as the fastest growing type of crime by the Federal Trade Commission.  According to a study released by the Identify Theft Resource Center, a national nonprofit organization that focuses on identity theft, over 7 million people in 2003 were victims of identity theft, a figure that represents a total of 13.3 victims every minute. 
    Other statistics cite the number of victims closer to 10 million, but Beth Givens, director of the Privacy Rights Clearinghouse, a consumer information and advocacy group, notes that with only about 25% of victims actually filing reports with the police, the true number of victims is unknown. Givens stated “We’ve been using estimates of 500,000 to 700,000 cases a year,” but adds, “You can toss those numbers out the window.”
    Unfortunately, the appraisal industry is not immune from the assault of identity theft.  In Illinois alone, the Appraisal Division for the Illinois Department of Financial and Professional Regulation acknowledges that they are aware of over $40 million worth of forged appraisals.
    And Chip Wagner, Appraisal Foundation Advisory Council Representative, fears that the Illinois statistics might be only the tip of the iceberg.  In a widely circulated article, Brian Weaver, a practicing appraiser for over 25 years and former investigator for the Office of Banks and Real Estate in Illinois, states that currently appraiser identity theft is most often accomplished in one of three ways. 
    First, is the instance of an appraiser-trainee who has a desire not to split fees with their sponsor/mentor.  The trainee uses their mentor’s license number and forges the mentor’s name to reports without the mentor’s knowledge.
      Second is the occurrence of appraisers who go phishing (a term for hackers who go on-line looking for exploitable data) for applicable appraiser license numbers published on websites and use those license numbers to generate false appraisals for unethical clients. 
    And finally, a trend that Weaver finds most disturbing, is the incidence of those who are not even appraisers who use phished license numbers to generate fraudulent appraisal reports.
    An additional concern is the security of an appraisers actual signature. Signature fraud is a reality in all disciplines that do business transactions electronically.  Signatures can be lifted from PDF files or from certain appraisal software packages as well as the old-fashioned method of lifting a signature from a hardcopy of a completed report. 
    As Weaver states, “When you think about it, who among your clients is so familiar with your signature that they can spot a phony?” and “with so many thousands of appraisal documents being fed through the system every day, who has the time or the skills necessary to compare signatures?”
    And therein lies part of the problem. It is almost impossible for lenders to use due diligence when operating within the frantic activity in today’s mortgage industry.  Gone are the days when lenders maintained a one to one relationship with their approved appraisers.  Today’s appraisal management firms have all but eliminated the safeguard that a close relationship with an independent appraiser offered. 
    Of course, this situation puts lenders at risk, but the effects on individual appraisers can be catastrophic.  In his article “License To Steal,” (full article available at www.naifa.com/news/brians_letter.pdf.) Weaver relates tales of appraisers who were victims of identity theft who have been banned from further work by their clients for inferior appraisal reports—reports they never even knew existed. 
    And, as with all victims of identity theft, the odyssey of clearing your name is just beginning.  An article in USA Today estimates that the average loss to victims to clear up the mess is $500 and to businesses, over $4,700.  In addition, the Identity Theft Resource Center estimates that clearing their name from identity theft causes victims to spend an average of 600 hours in recovering from this crime, a number that equals an average of $16,000 in lost wages.  Of course, these hard facts do not take into account the probability of increased insurance or credit card fees, inability to find a job, higher interest rates, and fighting with collection agencies about a crime you did not commit.
    But wait...that’s not all.  Weaver also warns about implications from the IRS.  The old saying “follow the money” holds a different meaning for those victimized by identify fraud.  Weaver asks, “Where are the fees for the twenty or thirty reports that you allegedly completed? They’re not in your bank account, so the undeclared income isn’t your responsibility, right? 
    But Weaver warns “the IRS may not see it that way.  In the end, you may not only be on the hook for bogus reports, but for undeclared income that you don’t even know about.”
    Perhaps the most alarming statistic of all, according to law enforcement, is that the average arrest rate is under 5% of all reported cases by victims.  Not a comforting thought to those of us who are hoping for a stop to this crime.
    As with mortgage fraud, and almost all other types of fraud, no one has an accurate number of just how large the problem is, but it is evident that this growing problem should be a concern to all of us.
    Weaver's article gives a few tips that may help us protect ourselves, and our businesses, from identity theft:
•    Remove your license number from your business card, stationary, website,
      and e-mail stamp.
•    Remove your license number from all websites that advertise services.
•    Stop sharing your software signature codes with everyone in the office.
•    Stop taping codes next to your computer.
•    Try using something more complicated than
     “appraiser” for a password.
•    Eliminate your E&O declaration page from your website.
•    Be vigilant about who has access to your license. 
    Of course, these precautions are only a start.  If you do business on-line, it is your responsibility to acquire the knowledge of not only the advantages it provides but also the harm it may cause.  Unfortunately, the crooks seem to stay one step ahead of us honest working people, but with vigilance we can at least limit their opportunities.
    For more information on how you can better protect yourself, read the information provided by the Federal Trade Commission, the Federal Deposit Insurance Corporation, and the Privacy Rights Clearinghouse.