The Federal Home Loan Bank Board has proposed regulations that would tighten real estate appraisal standards, including a rule that could substantially increase lenders' costs and a warning that appraisers are subject to criminal prosecution if they "willfully" overvalue property.

The proposed rules, aimed at cleaning up widespread abuses in the industry, were first submitted for public comment several weeks ago in response to a congressional report in September saying that faulty and fraudulent real estate appraisals have cost taxpayers, lenders and insurers billions of dollars.

Appraisal industry trade groups have recently begun efforts of their own to address some of their problems, but appraisers generally say they oppose federal regulations because they believe the industry can police itself.

In addition to the bank board's proposed rules, there is also legislation pending in Congress that would establish federal regulatory procedures for appraisers. The industry has never been regulated, and appraisers generally are not required by law to have special training or certification. The eight major industry trade groups, which represent about one-third of the nation's estimated 250,000 appraisers, require their members to meet certain ethical standards.

Appraisers are important in real estate transactions because savings and loan institutions and banks use appraisals to establish property values before deciding how much, and whether, to lend to buyers. When property is overvalued and owners default on their mortgages, lending institutions and federal insurance funds are hit with the losses.

The bank board regulates thrift institutions insured by the Federal Savings and Loan Insurance Corp., and in the past has issued guidelines to the thrifts on using appraisers, including a tough new set of guidelines issued in September.

The new rules proposed by the bank board effectively convert those guidelines -- and some new requirements -- into regulations that lending institutions would be required to follow.

The proposed rules loosen some of the present guidelines, but not as extensively as industry groups would like. The rules will go into effect later this year after a 60-day public comment period and after any changes are made as a result of reactions to the regulations. A majority of the country's banks and savings and loans are federally insured and so would be subject to the new regulations for using appraisers.

Among the provisions included in the proposed rules is one that would require personal inspections of property used to back loans bought by lenders. The rule says the person who inspected the property must be identified in a lender's files. Although "there may be considerable expense" involved in the verification procedure, the regulators believe the projected cost "is negligible in view of the risk associated with the purchase of out-of-state loans," according to a bank board memorandum describing the proposed regulations.

In recent years, many thrift institutions have suffered losses on loans backed by property in other areas of the country. The congressional subcommittee reported that at least 10 percent to 15 percent of the $1.3 billion in losses suffered by private mortgage insurance companies in 1984 and 1985 were caused by inaccurate and fraudulent appraisals.

The proposals also contain a warning that appraisers can be prosecuted under a federal law that carries a maximum penalty of two years in jail or a $5,000 fine if they "willfully overvalue land, property or security" in order to influence the bank board, any Federal Home Loan Bank or any federally insured institution.

Market value, the major ingredient in an appraisal, is defined in the proposed rules as "the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale." The proposals would eliminate two current guidelines that thrift industry groups opposed, including a requirement that appraisers predict the effect of future market conditions on a property's value and a requirement that appraisals be made within six months before loans are approved.

Another provision in the proposed rules would require thrifts to draw up guidelines to be used by appraisers in evaluating property. Appraisers also would have to submit more detailed descriptions of properties, including narrative reports or forms appropriate for specific properties.

Among other requirements, an appraiser's reports would have to estimate the highest and best use of the property based on several factors, consider previous sales, describe similar properties and describe the property. The individual in the thrift institution who reviewed the appraisal also would have to be identified.

Legislation to establish federal regulation of appraisals is expected to be introduced in the House in late June by Rep. Doug Barnard (D-Ga.), chairman of the subcommittee that issued the critical report of the industry, said a subcommittee aide who asked not to be named.

The bill, as drafted, would establish a federally chartered foundation to set standards and certification requirements for appraisers and create state boards to certify appraisers and to regulate the industry, according to the aide for the Government Operations Committee's commerce, consumer and monetary affairs subcommittee, which Barnard heads.

The legislation also would establish a "federal interagency council" of banking and other financial industry agencies, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp., and "probably" the Veterans Administration and Federal Housing Administration, he said. The council would oversee the foundation and state boards and decide what types of financial transactions would require the use of certified appraisers.

In addition, the FSLIC recapitalization bills passed by the House and Senate this spring, which now go to a conference committee, contain provisions requiring the bank board to "modify and improve" its current guidelines to ease restrictions that the thrift industry says has hurt business and "accelerated the slide in real estate market values," according to a House Banking, Finance and Urban Affairs Committee aide.

Most industry representatives oppose federal and state regulation and, instead, favor a self-regulatory system. Representatives of the eight trade groups have been working more than a year on proposals for self-regulation.