Thursday, December 22, 2011

Year-End Self-Assessment: How Did We Do on Our 11 Predictions for AMC Liability Risks in 2011?

One year ago, we offered 11 Predictions for AMC Liability Risks in 2011.  Being at the end of the year, it's time for self-assessment.  How did we do on our predictions?  It's important because when we do a good job at our company (LIA Administrators & Insurance Services) in understanding where future liability risk will exist and in sharing that knowledge with our insurance clients, then we and our clients are better able to cover that risk with appropriate insurance or other risk mitigation.  How does your insurance broker do?

Please keep in mind that predicting the risk of a liability event is not the same thing as predicting whether the event will actually occur.  However, this assessment is based on whether the liability events actually did occur.  Using that standard, my grade for our performance in the predictions is an "A-," a good grade that I feel is deserved for the particular accuracy of our FDIC prediction. 

Here is my assessment of how we did on each prediction that we made December 21, 2010 about AMC liability risks in 2011:

  1. "Several AMCs will be sued by the FDIC."  We did well on this prediction.  Two AMCs were, in fact, sued by the FDIC on May 9, 2011 for more than $100 million each.  A third AMC's appraisals have become the subject of another FDIC action, but the AMC is not named as a defendant. 

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Monday, December 19, 2011

WaMu's Top Officers Pay Pennies on the Dollar to Settle FDIC Claims. What's the FDIC's Case Against LSI Appraisal of Lender Processing Services Worth?

In March of this year, the FDIC sued Washington Mutual's former CEO Kerry Killinger, its former chief operating officer Stephen Rotella and its former head of residential lending David Schneider for $900 million in alleged damages resulting from their "gross negligence" in running WaMu's residential lending business.  The FDIC claimed that their negligence caused what is the biggest bank failure in U.S. history.  It also alleged that two of them unlawfully transferred assets to their wives to protect the assets from potential collection efforts.  Despite those strong allegations, however, the FDIC is now settling that case in a settlement that apparently stipulates for a cash payment of only $40 million -- almost all of that coming from WaMu's insurers.  From their own pockets, the former CEO will pay only $275,000, the former chief operating officer will pay $100,000, and the former head of WaMu's residential lending will pay $50,000.

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Friday, December 9, 2011

Two Free Appraiser CE Classes in East Brunswick, NJ on 12/14/11

This is a reminder about LIA and READI’s free 4-Hour CE seminar on appraiser liability prevention on 12/14/11 in East Brunswick, NJ -- the prior announcement of this class is copied below. 

In addition, I am pleased to announce that we’ve added an additional free seminar at the same location on the same day.  The additional class will be taught by Dennis Scardilli, JD, MAI.  He is one of the few MAI/attorneys in the U.S., and he is also a certified USPAP instructor.   His seminar is approved for 2 hours of appraiser CE in NJ (#2011-4000000).  It is entitled “New Jersey Real Estate Law, USPAP and You.”  His seminar particularly addresses common USPAP violations for which discipline is given in New Jersey.  He will be using real life examples.  As an attorney licensed in New Jersey, Dennis handles appraiser disciplinary actions and he’ll be sharing his knowledge and experience in the seminar.  He has performed a comprehensive review of discipline in the state and has detailed information to share.  The seminar is a perfect complement to our appraiser liability prevention seminar in the morning.  His seminar will begin at 1:30 and end at 3:30 at the Days Hotel, 195 Route 18 South, East Brunswick, New Jersey 08816(same location as the class described below).

Registration for either class is by email to  Both classes are free for appraisers who register for READI membership at or who are insured by LIA.

Here is the prior announcement regarding the 4-hour CE seminar:

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Friday, December 2, 2011

FDIC Files Amended Complaints in Lawsuits Against LSI Appraisal and CoreLogic

In the wake of Judge Carter's order granting motions to dismiss the FDIC's gross negligence and alter ego-type claims against LSI Appraisal and CoreLogic Valuation Services, the FDIC has filed first amended complaints against the appraisal management companies in each case.  It also has reserved the right to later appeal those rulings.

In its amended complaints, the FDIC does not seek to re-plead any negligence or other tort claims.  Instead, the FDIC recasts its breach of contract claim in each lawsuit into 2 parts: (1) for breaches relating to appraisals delivered prior to the execution of the comprehensive written contract between each AMC and WaMu (a small number of appraisals in each case for which the FDIC seeks damages of $8 million against LSI and $15 million against CoreLogic), and (2) for breaches relating to appraisals delivered during the period covered by each executed contract (a much larger number of appraisals in each case for which the FDIC seeks $145 million in damages against LSI and $113 million against CoreLogic).  If this strategy succeeds, it would aid the FDIC by blunting some of the effect of the limitations of liability found in each company's comprehensive contract with WaMu.  Aiming for that same goal, the FDIC also has added a brief allegation that any cap on liability should be disregarded because of each AMC's alleged gross negligence -- the FDIC's presumed theory being that under New York law, parties generally cannot limit their liability for gross negligence.  Here is that allegation from the amended complaint against CoreLogic:

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