Class Action Against LandSafe Settled

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Peter Christensen

Borrower Class Action Against LandSafe Appraisal Settled for $250 Million

…alleged that the lenders conspired with LandSafe to inflate appraisals to increase the size of mortgage loans sold on the secondary mortgage market…

Believe it or not, cases are still being litigated in relation to events during the mortgage meltdown years.

After nearly seven years of litigation, a settlement (subject to court approval) has been reached in the borrower class action filed in 2013 regarding appraisals managed by defendant LandSafe Appraisal Services between January 1, 2003 and December 31, 2008. The other defendants in the suit include Countrywide Home Loans and Bank of America and various affiliates. The central premise of the lawsuit was that the defendants had charged borrowers fees for home appraisals that systemically failed to comply with the Uniform Standards of Professional Appraisal Practice (USPAP).

Subject the court approval, the settlement calls for $250 million to be placed in a settlement fund for distribution to the borrowers. Using mortgage records, the settlement administrator will determine each borrower who obtained a Countrywide loan for which LandSafe provided the appraisal and then mail a check to each borrower for a pro-rata share of the settlement funds. It’s estimated that each borrower will receive about 22% of the amount they were charged for the appraisal.

The settlement of this 2013 case comes on top of several prior cases regarding appraisals for Countrywide and BofA, starting with the highly publicized whistleblower case initiated by LandSafe’s former employee Kyle Lagow in 2009 (a case that was handled by some of the same lawyers who handled this case against LandSafe).

While overseeing appraisal review work, Mr. Lagow alleged that he had observed systematic appraisal inflation relating to FHA loans originated by Countrywide and later BofA near the peak of the mortgage bubble. Lagow worked for LandSafe from 2004 to 2008. In his whistleblower complaint, he alleged that the lenders conspired with LandSafe to inflate appraisals to increase the size of mortgage loans sold on the secondary mortgage market and that the federal government was harmed when many of the loans defaulted, with the FHA then having to make insurance payments on them. Among many points, his complaint alleged that “go to” individual appraisers had signed as many as 350 appraisals per month. The U.S. Department of Justice intervened and settled that the case in 2012 for $75,000,000 — in combination with several other cases involving BofA and Countrywide which settled for a total of $1 billion.

The Lagow case was then followed up by a second case initiated by another LandSafe employee – which ended with Countrywide and Bank of America paying the governmental entities a total of over $16.5 billion to resolve multiple mortgage-related claims. Because these various actions were governmental fraud cases, however, they did not result in payments to individual borrowers — that is the purpose of the case now settled. The complaint and evidence presented by the plaintiffs in this case relied extensively on the information provided by Kyle Lagow in the original 2009 whistleblower case.

The motion for settlement approval and the relevant complaint are here:

Waldrup v. Countrywide, LandSafe, et al., Motion for Settlement Approval, 2-19-20

Waldrup v. Countrywide, LandSafe, et al., Third Amended Complaint, 10-27-14

 

Image credit flickr - Tony Webster
Peter Christensen

Peter Christensen

Peter Christensen is an attorney, licensed in California and Washington. His legal practice primarily serves the real estate valuation community - Valuation Legal. He's the author of Risk Management for Real Estate Appraisers and Appraisal Firms, published by the Appraisal Institute.

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8 Responses

  1. Kimberly Pugh DeFilippis on Facebook Kimberly Pugh DeFilippis on Facebook says:

    “Among many points, his complaint alleged that “go to” individual appraisers had signed as many as 350 appraisals per month.” ~ So what happened to the “go to” appraisers?

    5
    • Avatar Bill Johnson says:

      I’ve read about appraisers claiming to do 4 to 9 appraisals a day while working a 40 hour work week with only a single office visit, but in doing 11 to 15 a day, perhaps THEY should be coaching others. Or maybe they just outsource and delegate everything to the Philippines and blindly sign the report without doing reviews.

      Seek the truth.

      3
  2. Bob Faulkner on Facebook Bob Faulkner on Facebook says:

    Looks like the only people making out in this deal are the attorneys. Estimated payout to borrowers up to 22% of appraisal fee paid.

    3
    • Avatar Bill Johnson says:

      What about this Bob. Lets say they did 2 million appraisals over 6 years at $600 each where $300 went to the appraiser, and $300 went back to the company (they owned and operated as an AMC). That’s $600,000,000 in redirected fees from the borrower, away from the appraiser, and into the banks hands. If they never touched that money, and are paying a $250,000,000 fine today, I’d say their errors resulted in a PROFIT OF $350,000,000. What happens if they invested the original $600,000,000 into the stock market where its doubled in value over the past 15 years? That fine of $250,000,000 today is nothing when their errors result in a PROFIT of $950,000,000.

      Seek the truth.

      4
  3. Avatar SB says:

    Hey Skippy…

    I need a comp check…House has to appraise for $XXX,XXX
    and don’t worry…. there’s no appraisal review
    ….it’s going to Countrywide!”

    3
    • Baggins Baggins says:

      That’s right, it was the predetermined value stated on the order form. My vote continues for fines based on income. The only way mortgage fraud ceases to be a profitable endeavor. White collar crime is not really crime, it’s just regular business with a slightly higher potential for a higher cost of doing business, a decade after the transaction occurred. We’ll look forward to the decade long and continuing amc fraud to be resolved, sometime roughly 10-15 years from now, for dimes on the dollar. The broken record skips on.

      So what’s the newest scam? They get away with it, no real consequences for regular workers involved. Tens of thousands of individual mortgage brokers and appraisers, the bosses, and complicit company owners could have had cuffs slapped on, but that did not happen, they did not even get any spotlight or real fines. That’s the most powerful lesson learned and take away. Count me in on the next one because it’s obvious beyond obvious, there will be no penalties to provide deterrent. Those mb’s, appraisers, and people whom facilitated all of that, pocketed all the cash and walked away scott free. Where do I sign up?

      2
  4. Avatar Glen Kemp says:

    Unfortunately, some lenders engage in fraudulent practices, unduly pressuring real estate appraisers. The people who are responsible for this should be in prison.

    1

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Class Action Against LandSafe Settled

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