What you have to begin with is a statement of fact:
If lender knows that an appraisal is inflated, then it illegal for him
to fail to inform the borrower of this fact.
The correct phrasing of your sentence requires more than felicitous wording. You must first of all consider your audience. There are three possible interested parties -- lenders, borrowers, and lawyers. Let's take them in turn:
Lenders violate the law when they knowingly fail to inform the
borrower of an inflated appraisal.
"Lenders" is the subject and the first word. The verb is active. Lenders need to know when they face legal liability, the sooner in the sentence, the better.
Borrowers should be aware that lenders violate they law if they know
that your appraisal is inflated and they fail to inform you of this
Borrowers are the target audience, so "Borrowers" is the first word and subject. The verb is exhortatory, with auxiliary "should." The sentence could also be in the imperative: "Borrowers, be aware ...." This is a warning after the fact: borrowers generally have no way to check on the accuracy of appraisals.
The law is violated when a lender knows that an appraisal is inflated
and fails to inform the borrow of this fact.
Notice that the verb is in the passive voice and the actor has to wait to be identified in the subordinate clause. Even before lawyers want to know who might have violated the law, they want to know what the law says. They're used to a listing of the elements of a crime, so here it is 1) knows (mens rea, the guilty mind) and 2) fails to inform (actus reus, the culpable act).