Monday, November 10, 2008

Nationstar Mortgage -- Beware of a New Claim Tactic

We previously commented that Nationstar Mortgage is the lender who currently asserts the most claims against appraisers. In the last week, we have observed a new tactic being employed by Nationstar and feel that appraisers need to be aware of it to protect themselves.

A typical claim by Nationstar against an appraiser begins with Nationstar’s collection personnel contacting the targeted appraiser by telephone or email. Nationstar may then forward the appraiser a letter accusing the appraiser of “gross negligence” in performing an appraisal for one of its defaulted loans. The company threatens the appraiser with legal action or a disciplinary complaint unless the appraiser resolves Nationstar’s claim by paying a substantial sum of money, sometimes more than $100,000.

Nationstar’s apparent new tactic is to send a short agreement to the appraiser entitled “Errors and Omissions Claims Submission Form.” The form contains the following statement: “Based on additional review by Nationstar Mortgage it was determined that the appraisal contained some deficiencies and was completed in a negligent manner which would warrant a legitimate appraisal claim.” Nationstar’s collection personnel demand that the appraiser sign and return the form.

Regardless of his or her insurance coverage, no appraiser being targeted by Nationstar should sign this form or anything similar from Nationstar. (Indeed, no appraiser should sign anything like it for any lender making a claim against them without first consulting with their E&O insurer or an attorney.) Though this form contains a statement that “this is not an admission of guilt,” the form still appears intended by Nationstar to elicit the appraiser’s agreement that his or her appraisal was negligent. No appraiser should agree to this – particularly, when in our experience, almost all appraisals rendered for loans by Nationstar or other lenders making claims are defensible as of their effective date. Moreover, we’ve seen Nationstar pursue a claim against an appraiser based on a forged appraisal. Certainly, an appraiser should not agree that a forged appraisal would “warrant a legitimate appraisal claim” as stated in the form.

The bottom line is that an appraiser should never agree with Nationstar, or any party, that his or her appraisal was deficient or negligent (doing so could even jeopardize insurance coverage for the claim).