Monday, June 27, 2011

Appraisal Management Company (AMC) Surety Bond Requirements

*** This post is outdated -- see more recent post on AMC bonds here ***

Appraisal management companies, and even some traditional appraisal firms required to register as AMCs, must carry surety bonds under the new AMC laws in 10 states.  LIA Administrators & Insurance Services provides bonds in each state.  As of the date of this post, the states with AMC bond requirements are:
  • Arizona ($20,000)
  • Arkansas ($20,000)
  • Georgia ($20,000)
  • Kentucky ($500,000 pursuant to emergency regulations, effective 10/1/11, but subject to change because KREAB is considering the regulations) [Update -- amount changed to $25,000]
  • Missouri ($20,000)
  • New Mexico ($25,000)
  • Nebraska ($25,000 effective 1/1/12)
  • Oregon ($25,000)
  • Tennessee ($20,000 effective 7/1/11)
  • Washington ($25,000 effective 7/1/11)
How much do AMC surety bonds cost? Because there is very little claims experience with AMC surety bonds as of this date, the bonds are generally priced at the lowest premiums charged for generic surety and license bonds.  If a firm has an acceptable record and good credit, the average annual charge for an AMC bond is about 1% of its face amount for bonds in the range of $20,000 to $25,000 (i.e., $200 for a $20,000 bond).  Because of the administrative work entailed with issuing bonds, many brokers will charge an additional handling fee – some brokers charge several hundred dollars per bond.  LIA Administrators & Insurance Services does not charge any separate broker or administrative fees.


What is the application process?  Applying for a surety bond entails a short application -- shorter than for insurance -- but does require financial statements for the firm.  With some types of entities, guaranties may be required from the firm's principals.  These are necessary to ensure that the firm has the financial ability to pay the full face amount of the bond if required.  Approval and issuance of the bond usually takes no longer than two days.  LIA's application for bonds can be found here.



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Tuesday, June 14, 2011

LIA CE Seminar "Loss Prevention for Real Estate Appraisers" on June 16 in Bakersfield, CA

I will be teaching LIA's CE seminar Loss Prevention Program for Real Estate Appraisers on June 16, 2011 in Bakersfield, CA.  The seminar is approved for 4 hours of CE credit in CA (and many other states, including NV, AZ, OR, and WA). LIA is the presenter and provider of the CE class. It is being hosted by the Central California Chapter of the Appraisal Institute. The seminar will take place 1:00-5:00 p.m. The location is Hodel's Country Dining, 5917 Knudsen Drive, Bakersfield, CA 93308. The seminar tuition includes a lunch buffet from 12:00-1:00 p.m. (during the AI chapter meeting).


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Friday, June 10, 2011

Just a Few Seats Left in the LIA/READI Class on June 13 in Silverdale, WA to Support the Appraisers Coalition of Washington

There are just few seats left in this . . .

In our further support of the Appraisers Coalition of Washington (ACOW) and its political action for appraisers in WA, READI and LIA Administrators & Insurance Services are pleased to join with the Olympic Peninsula Chapter of NAIFA in offering LIA’s 4-hour live CE seminar entitled "Loss Prevention for Real Estate Appraisers” (WA course #AP544) in Silverdale, Washington, on June 13, 2011, 8:30 a.m. to 12:30 p.m., at the Silverdale Beach Hotel, 3073 Northwest Bucklin Hill Road, Silverdale, WA 98383-9191.

The CE seminar is being given as a fundraiser for ACOW. Accordingly, the only cost of the seminar is a $20 or more donation to ACOW (payable at the seminar).  In addition, appraisers insured through LIA's E&O program with Liberty Mutual become eligible for a one-time discount on their E&O premium of either $25 or $50 depending on their level of coverage – the discount may be taken on any payment due on a current or future policy after completion of the class.


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Wednesday, June 8, 2011

An Update on Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al. -- the "$24 Billion" Case in Idaho -- and the Plaintiffs' Expert Witness Declaration Testimony

In terms of alleged damages, the biggest case pending against any appraisal firm in the United States -- actually, I feel safe writing the biggest case ever -- is the lawsuit filed in federal court in Idaho by a group of property owners in four luxury developments in Idaho, Montana, Nevada and the Bahamas, Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al..  In their original complaint, the property owners demanded $24 billion in damages (yes, that's over-the-top) relating to development loans by Credit Suisse for which the appraisers provided appraisals.  
As noted in an earlier story about the case, the plaintiff property owners contend that the bankers and their appraisers conspired in what the plaintiffs call a "Loan-to-Own" scheme under which Credit Suisse, aided by inflated appraisals, purposely lent hundreds of millions to the developers intending that the developers would default and that Credit Suisse would then foreclose and obtain ownership of the resorts at below market value.  The plaintiffs in the lawsuit are not the appraisers' clients or anyone that the appraisers might have imagined as being intended users of their appraisal reports -- they are wealthy individuals who purchased individual properties in the resorts that were master-planned by the developers to whom Credit Suisse lent money.  Thus, contrary to what we more commonly see, these plaintiffs weren't even borrowers on the loans for which the appraisals were given or in any way parties to the transactions involving those loans.

The present status of the case is that the plaintiffs have filed an amended complaint recasting some of their alleged claims against Credit Suisse and Cushman & Wakefield.  In support of that complaint and a motion for summary judgment, the plaintiffs have obtained a 36-page declaration from an appraiser with the appraisal division of Grubb & Ellis, presumably a competitor to Cushman's appraisal business.

As noted in the earlier story about this lawsuit, I expected that the defendant appraisal firm and its appraisers, like other appraisers dragged into litigation, would soon learn in the lawsuit that "their colleagues, or competition, are ready and willing to testify against them."  Here, the plaintiffs' expert opines that USPAP applies to the appraisals at issue and details a long list of asserted USPAP errors.  That's nothing new -- in the current appraisal and legal environment, we see appraisers attacking other appraisers everyday for profit, whether by expert testimony or by "forensic" reviews for borrowers, GSEs, the FDIC, investors or mortgage insurers.  We routinely see appraisers hired as experts testify eagerly about alleged errors by their colleagues and also often see appraisers crossover into advocacy without making it clear they are no longer acting as appraisers.

The declaration in this case goes farther and offers that the defendant appraisers further intended for their appraisals to serve as a means to defraud those individual lot and property owners. Here are some highlights of the appraiser's declared opinions in that regard:

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