Monday, May 21, 2012

What Is the Statute of Limitations for Suing about an Appraisal?

The most common search question by appraisers and appraisal management company personnel that leads to the Appraiser Law Blog is some form of: "What is the statute of limitations for suing about an appraisal?"

Because this is so frequently misunderstood by appraisers, let me say this first: the relevant time period for suing an appraiser or AMC about an allegedly bad appraisal has nothing to do with USPAP's minimum 5-year record keeping requirement.  Don't throw those workfiles away!

So what is the time period for suing about an appraisal?  The time period varies by state and by the precise claim asserted, ranging from 1 year in Kentucky to 10 years in Rhode Island, and further depends on whether the "discovery rule" will apply.  So, it takes a 50-state chart to answer the question completely.  Appraisers and AMCs (who are in the same boat with appraisers when it comes to lawsuits) have access to such a chart at www.readimember.org (registration is required and subject to approval by READI).


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Sunday, May 6, 2012

An Update on FDIC Lawsuits Relating to Appraisals and a Chart of Target Appraisers' Locations

Update on the update: May 19, 2012 - in the last week, the FDIC sued approximately 20 more appraisers as the receiver for BankUnited in a last-minute rush to file the actions before the deadline for its negligence claims relating to that failed bank.  The appraisers affected by these new lawsuits are in New York, Pennsylvania, New Jersey, Washington, California and Florida.  All of the appraisals were performed for mortgage brokers.

In 2011, the FDIC filed its highest number ever of lawsuits naming appraisers as defendants.  So far in 2012, the FDIC's pace for suing appraisers has slowed, but that may change as the relevant statutes of limitations approach for several large lenders that failed in 2009.  (READI members can read about statutes of limitations and how they differ for the FDIC in "What Is The Statute of Limitations for a Lawsuit Against an Appraiser in My State?")

Since January 1, 2007, the FDIC has sued or identified in court documents approximately 500 individual appraisers for allegedly negligent appraisals.  Of these, approximately 165 individual appraisers and appraisal firms have been named as defendants and the remainder identified as negligent by the FDIC in its lawsuits against other defendants, such as bank officers and directors and appraisal management companies. 

In the last 5 years, the FDIC only has sued fee appraisers for one thing: over appraisal of subject properties.  Most typically, the FDIC has alleged that the appraiser's opinion of value was inflated because the appraiser selected inappropriate comparable sales (to use the FDIC's own words:  "more than one mile from the subject property").  For examples of allegations in recent FDIC lawsuits see "What Is the FDIC Suing Appraisers About?"

A few appraisers have now been sued or identified as negligent in multiple actions by the FDIC -- in other words, some have been sued twice for different appraisals, some have been identified as negligent for different appraisals in more than one lawsuit naming other defendants, and some are subject to both of those issues.  Though suing or identifying approximately 500 appraisers as allegedly negligent in its lawsuits, however, the FDIC has not, as a general rule, filed any complaints against appraisers with state appraiser regulators. Rather than pursue discipline, the FDIC almost uniformly only sues for monetary damages.  The average damage amount claimed by the FDIC in relation to an allegedly negligent appraisal exceeds $450,000.

The chart below shows the city and state of each appraiser sued or publicly identified by the FDIC as allegedly negligent since January 1, 2007.  In a few instances, I've changed the names of smaller cities/towns to more general descriptions. 

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Tuesday, May 1, 2012

FDIC Sues Bank Officers and Directors for, in Part, Failing to Heed Chief Appraiser's Advice

Can chief appraisers and other managerial appraisers at banks be sued for failing to fulfill their responsibilities with regard to oversight of the bank's appraisal functions?  Yes, they can and have been sued.  The types of actions they have been named in range from fraud actions by private plaintiffs, to whistleblower suits by other employees, to cases filed by government agencies after a bank's failure.

Has the FDIC sued any chief appraisers in the current spate of bank failures that began in 2008?  No.  Not yet.  While some chief appraisers or other managerial appraisers have captured the investigative attention of FDIC attorneys, the FDIC has not named any as defendants in any of its 490+ lawsuits since January 1, 2008.  In fact, so far, the FDIC actually has blamed a few failed banks' officers and directors for disregarding advice or information supplied by chief appraisers.  This new case provides a recent example.


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