By Russell Grantham

The Atlanta Journal-Constitution

New home appraisal rules echo earlier crisis-inspired reforms of the industry.

After the savings and loan crisis in the 1980s and 1990s led to failures of hundreds of financial institutions, federal lawmakers required states to create boards to license and certify the appraisers who provide valuations for most home mortgages.

But critics say the agency the Georgia Legislature created in 1990 to oversee appraisers has been relatively toothless even as the state headed toward the most recent financial crisis, becoming the nation’s epicenter for mortgage fraud cases in 2005.

Other hot spots for mortgage fraud, the FBI said at the time, included California, Florida, Nevada, Utah, Michigan and Illinois.

Those states are now leaders in another category: bank failures caused by collapsing loan values tied to the real estate crash. Georgia is now the nation’s leader, with 24 bank failures in less than 14 months.

Most of the mortgage fraud cases involved collusion by real estate investors and appraisers or lying by loan brokers and borrowers. But problems also arose because appraisers feared their business might dry up if their value estimates came in too low and caused deals to fall apart.

After almost two decades in existence, the Georgia Real Estate Appraisers Board still exists mostly on paper, grafted onto the tiny Georgia Real Estate Commission, which regulates real estate agents.

The appraisal board has no staff of its own. The combined agency currently oversees about 102,000 real estate agents and 5,000 real estate appraisers with a staff of about 30 people. That’s roughly 3,500 professionals per state regulator.

“Mortgage fraud, it’s the easiest crime to get away with,” said Atlanta appraiser Greg Wilkinson, because the agency is so overwhelmed. He said he was pressured to produce inflated appraisals but refused.

The epidemic of mortgage fraud “created a lot of cases for us,” said Real Estate Commissioner Jeff Ledford. But he said the agency’s workload is not as heavy as the statistics suggest because it has automated most routine tasks such as processing license renewals. “We have people mostly for investigations,” he said.

The mortgage fraud crisis has inspired other new regulations as well. Last year, Congress enacted a law requiring all states to set up systems to license and regulate loan brokers and other originators of residential loans.

Georgia’s version, administered by the agency that oversees state-chartered banks, is scheduled to go into effect Jan. 1.