FDIC Diversifies Its Appraiser Targets in Recent Lawsuits

Peter Christensen

Peter Christensen

General Counsel - Attorney at LIA Administrators & Insurance Services
A graduate of the University of California, Berkeley’s Boalt Hall School of Law, he has been an attorney since 1993 and maintains the blog Appraiser Law Blog. LIA has been offering E&0 insurance and loss prevention information to the appraisal profession nationally since 1972.
Peter Christensen

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In the last three months, since May 1, 2012, the Federal Deposit Insurance Corporation (FDIC) has sued 45 individual appraisers and appraisal firms in its capacity as receiver for one of the failed banks or lending institutions under its supervision. The appraisers targeted by the FDIC in its recent cases are a more diverse group, geographically and professionally, than in earlier cases, but in other respects the FDIC’s recent cases represent more of the same familiar story — suing appraisers to recover money damages for allegedly appraising properties too high for loans extended during the peak of the real estate bubble which are now in default.

Here are the facts regarding the FDIC’s recent cases against appraisers:

  • The defendant appraisers in the FDIC’s lawsuits since May 1, 2012 reside in the following states: CA, FL, IL, MI, MN, NC, NJ, NY, SC and WA.
  • Four of the appraisals at issue relate to commercial or development properties.
  • All of the appraisals at issue were performed in 2004 through 2008.
  • All of the claims by the FDIC allege that the defendant appraisers were too high in their opinions of value.
  • Several of the appraisers recently sued may not have E&O insurance coverage for the damages demanded by the FDIC because they either now have an E&O insurance policy with an FDIC exclusion (or “regulatory agency” exclusion) or have no insurance covering their prior appraisal work.

Examples of some of the FDIC’s recent cases filings are available on Appraiser Law here.

Peter Christensen

Peter Christensen

A graduate of the University of California, Berkeley’s Boalt Hall School of Law, he has been an attorney since 1993 and maintains the blog Appraiser Law Blog. LIA has been offering E&0 insurance and loss prevention information to the appraisal profession nationally since 1972.

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3 Responses

  1. Why do you think appraisers overvalued properties 2004-2008?
    1) The LO/MB/Lender mad us do it or else we were cut $$$ off.
    2) We, as appraisers saw a seemingly unending increase in volume and values and “forecasted’ what the value would be in 6-12 months ???
    3) We just did not care anymore, bad fee splits, large overhead, too much liability, constant pressure for value and turn time etc.
    I vote a combo of all 3.
    If someone did it 10-50 times take them out, but 1-5 times in 3-5 years is just business. That’s why there is risk, the risk is the interest payment and associated costs of the loan.
    Lenders are just seeking thouse pockets that are DEEP, E&O providers.

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  2. Retired Appraiser Retired Appraiser says:

    I have a simple question.

    Who in their right mind is willing to do appraisal work today under the following circumstances:

    *Doing twice the work (1004MC, UAD, 4 to 9 comps, etc.)

    *Assuming at least twice the liability and fully aware that everyone is targeting you including the FDIC.

    *All while surrendering up to 50% of your fee to AMCs.

    For the life of me I can’t figure this one out.

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  3. Jeremy Hall Appraisals - CO Jeremy Hall Appraisals - CO says:

    Oh Retired appraiser, appraising is a service industry job. It’s a vital position in the checks and balances system. It’s been too long coming, the penalty for some of these issues. / Now if only the FDIC would put forth a sample appraisal, indicating a framework for proper developmental standards.

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