HBA-ATS H.B. 511 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 511
By: Dukes
Financial Institutions
3/4/1999
Introduced



BACKGROUND AND PURPOSE

Current law prescribes penalties for appraisers who provide, or offer to
provide, a fraudulent appraisal in exchange for some benefit from a lender
requesting their services.  This addresses only half of the problem because
lenders are not subject to penalties for attempting to require appraisals
of a certain amount in exchange for contracting work to particular
appraisers.  Usually, an institutional lender will require an appraisal of
the home before lending money to ensure that the loan amount reflects the
fair market value of the property.  Despite the potential for penalties,
some appraisers are willing to juggle figures.  If an appraiser does not
agree to provide a fraudulent appraisal, it is possible that the lender
will replace the appraiser with another appraiser willing to submit a
skewed appraisal.  Without similar penalties for lenders who attempt to
secure an artificial appraisal, fraudulent appraisals are apt to continue
within the residential mortgage industry. 

H.B. 511 creates a criminal offense punishable as a Class A misdemeanor for
a lender who pays a licensed real estate appraiser a fee or other
consideration for appraisal services, if the offer to pay takes place
before the closing of a residential mortgage loan, is conditioned on a
minimum, maximum, or pre-agreed estimate of property value securing the
loan, and interferes with the person's ability or obligation to provide an
independent and impartial opinion of the property's value. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter D, Chapter 35, Business & Commerce Code, by
adding Section 35.55, as follows: 

Sec. 35.55.  OFFENSE: IMPROPERLY INDUCED APPRAISAL FOR RESIDENTIAL MORTGAGE
LOAN.  Defines "lender" and "residential mortgage loan."  Creates a
criminal offense punishable as a Class A misdemeanor (Section 12.21, Penal
Code) for a lender who pays or offers to pay a person, including a licensed
or certified real estate appraiser, a fee or other consideration for
appraisal services, if the offer to pay takes place before the closing of a
residential mortgage loan, is conditioned on a minimum, maximum, or
pre-agreed estimate of property value securing the loan, and interferes
with the person's ability or obligation to provide an independent and
impartial opinion of the property's value. 

SECTION 2.  Effective date: September 1, 1999.

SECTION 3.  Emergency clause.