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.