Thursday, September 15, 2011

Another New Liability Risk for AMCs

Appraisal management companies (AMCs) already have the liability specter of the FDIC's direct lawsuits against two large AMCs and FDIC attorneys looking into additional actions of that type.  AMCs also have the FDIC contending that appraisers are the "legal agents" of AMCs and that AMCs are thus fully liable and responsible for damages caused by alleged appraiser negligence "as a matter of principal/agency law."  (See yesterday's post about this topic here.) 

Now, there's a new problem for AMCs being caused by the FDIC.

This is a very generic description of an issue that has popped more than once:  A lender client had complaints about the accuracy of an appraisal delivered by the AMC which, according to the lender, would likely cause a monetary loss on a loan in default.  That would be a normal scenario for many AMCs.  What was different here was that the lender had discovered that the appraiser on the AMC's fee panel who prepared the report had been identified by the FDIC in litigation as delivering other allegedly negligent appraisals.  The lender was now contentiously demanding to know from the AMC why that appraiser was preparing reports for them through the AMC and demanding that the AMC conduct due diligence as to similar issues affecting all other appraisers who might perform appraisals for the lender.