Is pressure impacting industrys moral compass?


Dave Hutton

While a moral compass can point the proper direction, whether or not it is followed is a decision the individual has to make, a choice over the past decade that has become increasingly difficult for appraisers to make.

John Ross, the former Appraisal Institute CEO who is now with Zaio Corp., told Valuation Review recently that there have been significant pressures in the valuation profession, and recent research including studies by October Research Corp. illustrate the point.

I think one of the weaknesses of licensing and certification has been that the enforcement has not been as strong as it should be, he said. Insofar as that is the case, I think there has been some weakening of the moral compass across the appraisal industry.

Ross pointed out that true professionals have for years expressed frustration that market circumstances have allowed for an erosion of the moral compass of the industry.

The reason? Strict adherence to a moral compass can, in the short term, be a risky proposition.

One way to ensure the industrys moral compass stays on a steady heading could be the protection of appraiser independence.

The importance of protecting appraiser independence was stressed late last month as a number of industry leaders presented testimony before a Senate subcommittee on mortgage industry abuses.

Alan Hummel, SRA, chairman of the Appraisal Institutes Government Relations Committee and chief appraiser for Forsythe Appraisals, told the Senate Committee on Housing, Transportation and Community Development appraisers face pressure from various parties involved in mortgage transactions.

Hummel told the panel a single standard for all lenders and brokers ordering real estate appraisals will help stop appraiser coercion, which was described as one of the leading contributors to mortgage fraud.


When appraisals are delivered, appraisers face pressure from various parties involved in mortgage transactions. They are told to doctor their appraisals or else never see work from those parties again, Hummel told the committee.

As the problem of lender pressure on appraisers reaches pandemic proportions, many valuation professionals are faced with making crucial, ethical decisions.

In detailing appraiser coercion, Hummel presented an independent study conducted earlier this year by the October Research Corp., which found that 90 percent of appraisers were pressured by mortgage brokers, lenders, realty agents, consumers and others to raise property valuations to enable deals to go through, doubling similar findings from three years ago.

Ernie Durbin, CRP, a veteran appraiser from Hamilton, Ohio, told Valuation Review recently appraisers who are holding the line and have an unwavering moral compass unfortunately are suffering the greatest losses.

But just what is a moral compass?

Moral Intelligence

Doug Lennick, managing partner of the Lennick Aberman Group, co-authored Moral Intelligence: Enhancing Business Performance and Leadership Success with Dr. Fred Kiel.

During a conversation with Valuation Review, he discussed moral intelligence in todays business world. He pointed out that the idea is applicable to any field, from valuation and real estate to law and finance.

According to Lennick, a useful way to think about your moral compass is to think of it like an ordinary compass with true north representing integrity, south symbolizing forgiveness, east embodying compassion, and west denoting responsibility.

Lennick and Kiel define moral intelligence as the mental capacity to determine how universal human principles should be applied to our values, goals and actions.

In the simplest terms, moral intelligence is the ability to differentiate right from wrong as defined by universal principles. Universal principles are those beliefs about human conduct that are common to all cultures around the world.

Lennick pointed out that people use moral intelligence to adhere to their moral compass.

Lennick contends there are moral principles that apply to human kind, regardless of gender, race, ethnicity or geographic location.

The compass helps us be pointed in the right direction, he said. Our humanity allows us to make mistakes anyway.

Making the commitment

For sustainable optimal performance over time, there must be a commitment to the principles of the moral compass.

We dont make the social case or the religious case for moral intelligence and the moral compass, Lennick pointed out. We make the business case.

As a result, Lennick and Kiel identified the four principles that stand the test of the business world. They include integrity, responsibility, compassion and forgiveness the four directions of the moral compass.

In the late 1980s, there was a credibility crisis that raised a few eyebrows. Few industries were untouched by the wave of reform. The appraisal industry got licensing, FIRREA and other changes in the wake of the savings and loan crisis.

Lennick said he believes the pendulum is swinging back and there are more and more people who are becoming enlightened capitalists.

I do think moral thinking is coming back, he said.

Such a phenomenon can be seen in the appraisal industry, where the vast majority of valuation professionals are sickened by the moral compass that a few appraisers are following today.

Ross told Valuation Review he witnessed the level of frustration among many professionals during his tenure with the Appraisal Institute.

Within the professional element of the valuation profession, those who are affiliated with professional organizations have expressed a lot of frustration, he said. I dont think there has been any erosion among those who consider themselves to be truly professional.

David Hutton is the editor of

Valuation Review

, the leading source for news and analysis for the real estate appraisal industry. Valuation Review provides its members with relevant content that informs them about the valuation profession and helps keep them ahead of the competition. Valuation Review is a publication of

October Research Corporation

, the nations leading provider of market intelligence, business news and regulatory information for the real estate, settlement services and mortgage origination industry.

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