A former property appraiser testifying at the criminal trial of his one-time business partner -- while awaiting sentencing himself -- walked jurors Thursday through the process by which home values were inflated during the housing boom that later busted the economy.
Joel Reck, 48, of North Braddock worked with Jason Moreno at Platinum Appraisal Services from around 2004 through 2007. Mr. Moreno, 30, of Brighton Heights faces charges of conspiracy and wire fraud in relation to Platinum's appraisals on behalf of a number of mortgage brokers, some of whom have been convicted or charged.
Appraisers estimate the market values of properties based on their condition and the sales of comparable, nearby homes. Their estimates justify mortgages.
Mortgage brokers, according to Mr. Reck, would provide appraisers with "predetermined values" of homes, tailored to the proposed loans. If the appraiser wanted to keep getting that broker's business, he would do anything possible to value the home at or above the predetermined value, he said.
Mr. Reck said he would upgrade a property's condition from fair to good and avoid mentioning holes in the walls, a lack of carpeting or plumbing leaks.
"You always try to get the best picture to make it look as good as it possibly can," Mr. Reck told the jury on direct examination by Assistant U.S. Attorney Brendan Conway.
Rather than pick comparable, recently sold properties from nearby blocks, he would try to find the highest priced, vaguely similar properties within a two-mile radius, Mr. Reck said.
Sometimes he would indicate that upgrades were done even if they hadn't been started. If the materials for the upgrade were on hand, Mr. Reck said, "I would say, 'OK, that's close enough to be sure that they're going to put them in.' "
Mr. Moreno has pleaded not guilty, and his attorney, Michael DeRiso, has said the allegedly fraudulent appraisals were signed by Mr. Reck.
Mr. Reck said that's because he gave Mr. Moreno the password to access his electronic signature. When he discovered hundreds of appraisals with his signature on them, for properties he'd never seen, Mr. Reck confronted his partner, he claimed.
"[Mr. Moreno] said, 'I'll deny it until the day I die,' " Mr. Reck told the jury.
Mr. DeRiso portrayed Mr. Reck as a fraud mentor to his younger partner.
"There were times when you would inflate the value so high that you were hopeful that you wouldn't be called out on it, because you couldn't defend it," the defense attorney said.
Mr. Reck agreed.
Mr. Reck surrendered his appraiser's license about five years ago and has left the industry. He awaits sentencing for wire fraud conspiracy.
The trial is before U.S. District Judge Nora Barry Fischer.
Rich Lord: firstname.lastname@example.org, 412-263-1542 or Twitter @richelord First Published September 12, 2013 1:15 PM