Wednesday, April 18, 2012

Court Permits Negligence Claims to Go Forward in Gibson v. Credit Suisse and Cushman & Wakefield

One case that cannot be ignored on something called the Appraiser Law Blog is Gibson, et al. v. Credit Suisse, Cushman & Wakefield, et al.  Even though the plaintiffs' claims in my view just amount to buyer's remorse following a deflated real estate price bubble, the case needs to be recognized because:

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Monday, April 16, 2012

What is the FDIC Suing Appraisers About? Some Examples of the FDIC's Specific Allegations

The FDIC continues to sue residential appraisers in connection with origination appraisals and review appraisals performed for failed lenders between 2003-2009 on loans now in default.  It may be helpful, or scary, for appraisers and AMCs to see for themselves exactly what kinds of alleged USPAP violations or other errors the FDIC is claiming in lawsuits against appraisers.  Therefore, I have copied below the FDIC's actual allegations against several appraisers.  These are word-for-word the entirety of the FDIC's claimed errors against these appraiser defendants.  Please don't shoot the messenger.  I'm a lawyer, not a USPAP expert, but even I know some of these things aren't really "USPAP violations" despite the FDIC's allegations.

The FDIC's favorite alleged "USPAP violations" or other alleged errors in its most recent cases have been:
  • "USPAP required that [the appraiser] analyze whether the level of appreciation was sustainable;"
  • The comparable is "more than one mile from the subject property;" and
  • The comparable "involved a sale that was more than six months old."
Even though the complaints filed by the FDIC in court are all public documents, I've chosen to conceal the appraisers' names because I don't think the focus should be on who they are -- they could be any of tens of thousands of appraisers who delivered appraisals to failed lenders now under FDIC receivership.

Again, the portions of the FDIC's complaints I've provided below are word-for-word the entirety of the FDIC's claimed errors in the lawsuit complaints against these appraiser defendants.  In other words, I'm not cherry-picking from the FDIC's allegations or taking them out of context.  (In fact, if we looked at the full context of the loan transactions in these lawsuits, the complete stories involve borrower and mortgage broker misrepresentations about occupancy, employment and income.)

1.  FDIC v. Appraiser (in Black):

In this 2011 case, the FDIC sued the appraiser for alleged professional negligence relating to appraisals for two loans extended in 2005.  The FDIC demanded $518,000 in damages against the appraiser.  Below are the FDIC's allegations about the alleged errors in one of the appraisals:

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Friday, April 6, 2012

Appraiser Liability Prevention Resources

Listed below are 9 of the most popular written resources on READI's site  The materials contain analysis and information that cannot be found elsewhere on the internet or in print.  We are able to share more detailed information there than we can in a public setting, such as this blog, because access to READI's materials is limited to persons with a legitimate interest in READI's liability prevention mission.

Appraisers and appraisal firms insured by LIA have access to READI's resources.  Subject to approval, others may join READI for access to most resources by following the registration procedure explained on the site. READI is free for appraisers who fulfill the registration requirements.

1.  What is the Statute of Limitations for a Lawsuit Against an Appraiser in My State?
. . . the chart below identifies the relevant time period for a professional negligence claim against an appraiser in each state, provides the statutory basis for that time period, and indicates whether courts in that state will likely apply a “discovery rule” to a claim. . .

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Tuesday, April 3, 2012

FDIC Filing MBS Lawsuits Based on Appraisal Defects as Determined by AVMs

The FDIC has joined the fray of mortgage backed securities (MBS) litigation as a plaintiff.  In one of several MBS-related legal actions, the FDIC recently sued Countrywide Financial and Bank of America in connection with poorly performing MBS held by failed Security Savings Bank.  The FDIC filed this particular lawsuit in state court in Clark County, Nevada on February 24, 2012.  Countrywide and BofA have since removed the action to federal court.  It's among the first of several MBS cases that the FDIC has filed as a plaintiff, though it has inherited other cases after plaintiff banks failed.

The FDIC's complaint in this case is virtually identical to the dozens of other MBS complaints against mortgage originators and aggregators filed by pension funds, insurance companies, banks and other MBS investors. The newsworthy point here is that the FDIC is deciding to join in this litigation boondoggle and is doing it exactly in the same way as many "civilian" MBS investor plaintiffs.  For the appraisal industry, it's also worth observing that the FDIC is using the same retrospective AVM model as the other MBS plaintiffs to claim the appraisals at issue were flawed and failed to comply with USPAP.

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