Former Chief Appraiser Sues Appraisal Management Company Over Alleged Appraisal Independence Violations
With respect to appraisal management companies (AMCs), based on the large volume of appraisal regulatory and legal matters that we track, I feel comfortable stating that there is no material governmental enforcement of the appraisal independence rules adopted in the Dodd-Frank Wall Street Reform and Consumer Protection Act (or in the earlier rules adopted by the Federal Reserve Board in 2008 as part of Regulation Z). Neither the Consumer Financial Protection Bureau nor any state attorneys general have undertaken any significant investigations or taken any significant legal actions with regard to enforcement. Instead, the most serious legal threat to AMCs involving alleged appraisal independence violations under Dodd-Frank arises indirectly in civil litigation by private parties, particularly by former or present employees who are either true or de facto “whistleblowers.” The present lawsuit illustrates one such case.
The plaintiff in this lawsuit was the former chief appraiser of TriMavin, LLC, in Santa Ana, California from October 2011 to January 2013. TriMavin is an AMC subsidiary of Stearns Lending. She filed a complaint against TriMavin and Stearns Lending on July 22, 2013 in Superior Court in Orange County, California. In her complaint, she alleges that TriMavin violated appraisal independence rules by adopting lists of favored appraisers from Stearns Lending’s loan production staff for inclusion in the panels of appraisers performing appraisal work for loans by certain loan originators. She further alleges that these appraisers were then given priority for assignments by a ranking system manipulated to produce that result. She alleges that when she raised objections about this process to TriMavin’s president and other management, she was rebuffed and that she was ultimately fired for refusing to acquiesce.
This will be an interesting case to follow because, although it is a wrongful termination case, it is one
of the first litigations involving a high number of appraisals and alleged systematic violations of appraisal independence rules enacted under Dodd-Frank. The alleged violations, however, are perhaps not as clear cut as may be alleged in the complaint. Whether there were independence violations will come down to the details of exactly who provided the alleged lists of appraisers and on what bases such appraisers were selected. But there is another aspect to her claim — she alleges that prior to her termination, the AMC’s president told her: “he had decided a man would be better equipped to handle plaintiff’s job as a man could deal with production personnel better than a woman.” The plaintiff’s attorneys, however, apparently have decided against pursuing a gender discrimination claim. Perhaps her lawyers are clever: a client or business partner of the AMC and lender might not be so concerned about a “normal” gender discrimination lawsuit, rationalizing that it’s an internal employment matter, but a client or business partner will certainly care about having its own name dragged into the lawsuit in connection with the alleged violations of appraisal independence for transactions in which they are involved — and, indeed, there is a well known Southern California homebuilder named in the lawsuit. This tactic will perhaps put pressure on the AMC and lender to settle the plaintiff’s lawsuit early. Pursuit of the appraisal independence allegations also carries with it the additional threat of causing potential civil litigation by third-parties who have purchased loans sold by Stearns Lending or by borrowers.