When the appraisal for a home purchase is off the mark by thousands of dollars, who is responsible?

When an appraiser totally misses -- or ignores -- readily apparent structural defects in a house that depress the property's true value, who is to blame?

Obviously the appraiser. But under what could turn out to be a controversial new consumer-protection plan from the Bush administration, the government wants to hold the mortgage lender equally responsible with the appraiser for such errors. After all, the lender or broker hires the appraiser, and frequently shares information regarding either the home sale price or the valuation amount needed for the refinancing.

Now Housing Secretary Mel R. Martinez wants to put all lenders on notice: If you seek Federal Housing Administration insurance for a mortgage, you better be willing to take the rap yourself if the appraisal turns out to be inflated or significantly in error.

In a regulatory proposal this week, Martinez said lenders should be equals in legal liability for lousy appraisals. The preamble of the new policy also notes that some lenders put pressure on appraisers to influence their valuations.

These "lenders tacitly require appraisers to make the appraisal computations match the sales price to ensure that a home sale and mortgage loan closes for the appraiser to obtain additional business," according to Martinez. Other lenders collude with appraisers, he added, to fraudulently create property "flips" -- rapid-fire resales of homes with inflated valuations -- that harm consumers and the FHA insurance fund.

Under Martinez's policy, lenders who hire bad appraisers will be subject to tough administrative and financial penalties. The policy will not apply to non-FHA transactions, but it could serve as a model for future legislation at the federal or state levels, affecting all home sales.

Will it work? Appraisers generally think so and welcomed the plan.

"It should ultimately be a good thing for everybody involved," said Frank Gregoire, the immediate past chairman of the appraisal committee of the National Association of Realtors and the current chairman of Florida's state appraiser regulatory board. Gregoire thinks the prime beneficiaries will be consumers who might otherwise end up with an overvalued house riddled with significant defects.

Donald E. Kelly, vice president of the Appraisal Institute, the profession's main lobby on Capitol Hill, was less restrained.

"Hallelujah!" he said when informed of the plan. "We have been asking for something like this for years." The Appraisal Institute has been in the forefront of a national campaign to discourage lenders and real estate agents from putting economic pressure on appraisers to "hit the number" needed to close transactions.

Lenders' initial reactions to Martinez's proposal were critical. Stephen O'Connor, vice president of government affairs for the Mortgage Bankers Association of America, questioned "whether HUD has the statutory authority" under federal law to make lenders equally responsible for appraisal quality. He argued that appraisers "are independent contractors, individually licensed and regulated at the state level," and that they should stand behind their work. Moreover, O'Connor said, the FHA itself maintains a national roster of approved appraisers for lenders to choose from, indicating that the government sanctions the integrity and competence of the roster members.

Where is this issue headed? Absent a lawsuit by lenders blocking its implementation, the odds are good that the government will adopt the proposed rules by summer. The threat of heavy financial penalties, in turn, should motivate most lenders who deal with the FHA to adopt stricter appraisal-review procedures to ensure accuracy.

The bottom line for consumers? A net gain: You pay for the appraisal required by the mortgage lender. Why shouldn't it be the most rigorously accurate valuation possible?

Congress passed a one-year reauthorization of the federal flood hazard insurance program last week. As reported in the Dec. 14 column, the lame-duck Congress had put an estimated 400,000 American homeowners and buyers into potential jeopardy by leaving for the holidays without reauthorizing the $623 billion program for 2003. The legislation makes coverage retroactive to Jan. 1.

Kenneth R. Harney's e-mail address is kharney@winstarmail.com.