In a letter to Treasury Secretary Timothy Geithner on Monday, four appraisal organizations, representing more than 35,000 real estate appraisers, voiced their opposition to the Home Affordable Foreclosure Alternatives (HAFA) program, set to take effect April 5, 2010.

The Obama administration’s program allows broker price opinions (BPOs) to be used to determine the value of properties to establish a minimum offer of a short sale. However, BPOs are only estimated values of a property as determined by a real estate broker and are not the same as appraisals.

In the letter, the Appraisal Institute, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers said, “We strongly believe continuing to allow BPOs in the property valuation component will not adequately protect the public interest (consumer, borrowers, etc.) or the interests of the various parties to the loan (lenders, loan servicers, etc.) and is likely to exacerbate mortgage fraud.”

The letter noted that law enforcement officials have highlighted loan modification fraud — including fraud involving short sales — as a new form of mortgage fraud. To mitigate such conflicts, the coalition, which was led by the Chicago-based Appraisal Institute, urged the department to reestablish independence in the valuation process to protect the safety and soundness of financial institutions, improve transparency, and safeguard the public trust.

Specifically, the appraisers said any arrangements to encourage short sales should require competent appraisals prepared in accordance with the Uniform Standards of Professional Appraisal Practice.

“Generally speaking, real estate agents and brokers are not independent or properly trained valuation specialists,” the letter said. “They have an inherent bias towards quick results and actions which produce a fee for themselves, irrespective of whether the lender, servicer, investor, property owner, and/or borrower gets a fair return on the short sale.”

The organizations said HAFA guidelines should be revised to prohibit the use of BPOs for property valuation requirements involving foreclosure alternatives, including short sales. There are an ample number of qualified real estate appraisers to perform valuation services, and revising the program guidelines will reestablish independence in the valuation process and guard against conflicts of interest in short sales, the coalition said.