Posts tagged E&O
Fannie Mae Form 2075 (aka the “Desktop Underwriter Property Inspection Report”) seems innocuous enough when you pick it up and look at it. After all, it’s only a single page with just one-half page of instructions.
It allegedly applies only to low risk loans and the form has been around and in use for a long time. The instructions even clearly state it “is not an appraisal report”. The instructions go on to say this report may be used without an estimate of fair market value of the property because the Desktop Underwriter has determined the only valuation necessary can be obtained from the proprietary automated valuation model (AVM). Once this determination has been made, the lender needs only to obtain an exterior-only property inspection.
So, why the sudden concern with Form 2075? (more…)
A lawsuit filed last week by a former staff appraiser against LandSafe Appraisal Services, Inc. exemplifies the overtime liability risk faced by many appraisal firms and appraisal management companies.
In February, I wrote that overtime lawsuits by appraisers present a genuine liability risk to appraisal firms and AMCs. In that article, I explained some of the special issues relating to whether appraisers properly can be treated as “exempt” employees for purposes of overtime compensation. The real-world risk to an appraisal firm or AMC is that a staff appraiser will file a legal action alleging that he or she worked more than 40 hours in a workweek, perhaps for a period of years, and will demand all of the unpaid overtime due plus penalty damages, interest and attorneys’ fees. For larger firms, there is the threat of a collective action under the Fair Labor Standards Act (FLSA) — the overtime equivalent of a class action. Such actions could be filed either by employee-staff appraisers or potentially by appraisers who contend they were misclassified as independent (more…)
It has been eight years since the URAR form was revised. From 2005 to mid-2008, the real estate market experienced a boom and a bust the likes of which we have never seen before, and we are finally seeing a slow recovery. Also during this period, the economic recession and poor lending practices lead to new regulations in both the appraisal and banking industries. Based on the new regulations, Fannie Mae/Freddie Mac mandated appraisers to add more information to the URAR form.
As of March 2009, the Market Conditions Addendum to the Appraisal Report required appraisers to research and analyze the general market conditions. In September 2011, Fannie Mae mandated that appraisers employ the Uniform Appraisal Dataset (UAD) as part of the URAR form. The goal was to standardize information supplied by the appraisers on the forms, especially as to descriptions of quality and condition of the subject property and comparable sales. Another directive was that whenever adjustments are made to an appraisal for the year the dwelling was built (actual age) vs. the effective age, the appraiser must provide an explanation for the adjustments. Finally, Fannie Mae also dictated that the proximity of comparable sales to the subject must be stated in miles and include the “applicable directional indicator”. Many of these changes (more…)
Since we last wrote about the unusual subpoenas coming from the offices of the FDIC through the law firm called the Mortgage Recovery Law Group (MRLG), we’ve learned some interesting things that you need to know.
To read the original blog post “What to do if you get a subpoena from the FDIC”, CLICK HERE.
First, the MRLG contracted with the FDIC in late 2010 to pursue collection of losses for the FDIC resulting from the many bank failures caused by the economic (real estate) downturn.
Of particular interest is that the MRLG is not working on a contingency fee arrangement like most collection work is done. Rather, the MRLG attorneys are getting paid fixed hourly rates ranging from $295 to $575 per attorney. I’m not sure about you, but I’m pretty certain my hourly rate doesn’t come close to these rates.
Next, in a prior life the lead partner for the MRLG was in-house counsel for (drum roll, please)…IndyMac Bank, one of the banks which failed and which the FDIC took over. (more…)
As of January 28, 2013, Fannie Mae started placing greater restriction on the data they collect to ensure uniformity. You will now begin seeing a “hard stop” issued by Fannie Mae on messaging. This change affects Appraisers working with AMCs or other lenders who submit data to Fannie Mae.
What has changed?
As appraisers know, the Uniform Collateral Data Portal (UCDP) is an electronic tool that Fannie Mae uses to ensure uniformity in the data that Appraisers collect and submit. The theory is that being able to track trends and information through data collected on appraisals will ensure more informed lending decisions. In order to track trends and data accurately, it must be as uniform as possible.
What does that mean for Appraisers? (more…)
The significant increase in insurance claims and disciplinary complaints against appraisers over the last few years is directly related to the foreclosure phenomenon and subsequent pattern of appraisal reviews performed during the last decade. The validity of both the process and results of these forensic reviews may have little relationship to the subsequent actions by those seeking the deep pockets of the appraiser and their insurance carriers to recover monies lost in bad loans. This trend shows no sign of diminishing. It remains incumbent upon appraisers to understand their errors and omissions insurance policies, any available risk management services available through the insurer and the common occurrences that result in claims or complaints.
Understanding Your Errors And Omissions Policy
Errors and Omissions insurance policies have language and conditions that dictate the appropriateness of the policy for one’s appraisal practice and how coverage may be applied in the event of a claim. Here is a brief look at important policy features. (more…)
I recently ran across the provision below in a new contractor agreement between an AMC and its panel appraisers, when one of LIA’s insured appraisers asked me to take a look at the agreement. The contract contained the average indemnification provision found in most unfair AMC contracts in which an appraiser promises to defend and reimburse the AMC for “any and all liabilities, damages, costs and expenses (including all legal fees) arising out of or relating to any claim, action, suit, complaint, liability, damage, or other proceeding” relating to appraisals done by the appraiser and a long list of other things.
But then the contract got a little more crazy: (more…)
Chicken Little was right – the sky is falling… and landing on both appraisers AND inspectors.
Home inspectors often suffer from a general lack of respect, part of which is caused by the fact that they have no single set of national standards of practice like appraisers who have USPAP.
Appraisers, on the other hand, suffer from what is commonly known as appraisal creep where the conditions and requirements of appraisal work keep expanding, but the fees for the work either shrink or stay the same.
Now, forces within the government are conspiring to stick it to both groups.
Almost all of the questions deal with Supervisor – Trainee issues that will change in 2015. If like me, you believe it is difficult enough to find people to become appraisers today, just wait until you read all of the new requirements.
I don’t understand where the AQB is coming from with all these new requirements. Do they really believe that someone will want to go to college (at an average cost of about $120,000) to get a degree and then become a Certified Residential appraiser who would be lucky to make (more…)
I am biased in favor of defendant appraisers. I always root for the defense, even if it’s one appraiser suing another appraiser (as in one case below). Defense is our business. Here, are seven cases where the defendant appraisers won based on a statute of limitations defense. That means even if there was something wrong with the appraisal at issue, the defense counsel still won the case. So, you have to give the credit to the defense counsel. That’s not to say there really was a problem with the appraisal in each case below — it just didn’t matter if there was.
Here are the seven cases: (more…)
These are four of the parties who have been suing the most appraisers in 2011-12. I suspect most appraisers won’t recognize two of the names, unless the appraisers are defendants in one of their cases. The parties are in no particular order, but the last one does file the most lawsuits.
LSF6 Mercury REO Investments
This is an investment fund of a private equity company named Lone Star. LSF6 bought discounted mortgage debt from bankrupt CIT Group in 2008. In late 2011, LSF6 began suing appraisers in New York as part of what appears to be an experiment with mass appraiser litigation to recover damages from appraisers relating to the defaulted mortgages. Most of the mortgages and appraisals at issue date to 2005 to 2007. So far, LSF6 has sued at least 50 individual appraisers and small appraisal (more…)
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: (more…)
Because some AMCs still wrongheadedly insist that appraisers do it, we are asked this question a lot: “should I attach my E&O declarations page to my appraisal report?” The answer is always the same: it’s a bad idea. It’s bad for both the appraiser and the client/AMC. It is perfectly reasonable for a client or an AMC to ask for proof of E&O insurance and ask to receive updated insurance information each year. That’s common to many professions, but there is no good reason to require that the information be included within or attached to appraisal reports. (Lawyers like myself certainly don’t attach proof of insurance to our opinion letters or legal briefs.)
Why is it a wrongheaded practice?
Let’s start with this basic fact: the insurance policy that the appraiser has at the time of performing an appraisal (more…)
Frank Gregoire’s written testimony to the United States House of Representatives Committee on Financial Services Subcommittee on Insurance, Housing and Community Opportunity before the Appraisal Oversight Hearing
APPRAISAL ISSUES AND CHALLENGES
There are a myriad of circumstances and issues working to hinder the recovery of the nation’s housing market. Among them, and often overlooked, are those related to the credible valuation of real property. A credible valuation provided by a licensed or certified professional 1) ensures the real property value is sufficient to collateralize the mortgage, 2) protects the mortgagor, 3) allows secondary markets to have confidence in the mortgage products and mortgage backed securities, and 4) builds public trust in the real estate profession. However, in today’s world there are many road blocks in the way of valuing property and, as a result, allowing for a healthy recovery of the broader real estate industry. Because there are many roadblocks there is no one, “silver bullet” solution. (more…)
We have received multiple reports from appraisers and defense counsel about the mysterious “Notice of Claim.” The notices are so far nearly identical and state that the FDIC has filed a lawsuit for damages against one of two AMCS (either CoreLogic-eAppraiseIT or LSI Appraisal) based on one or more of the recipient appraiser’s appraisals and that the appraiser may be the subject of claims for negligence by one of those AMCs or by another party. The notices further direct the appraiser to report the notice to his or her E&O insurance carrier. The notices then attach the first page of a lawsuit complaint filed by the FDIC, a list of appraisers who are identified as having provided allegedly negligent appraisals in that lawsuit, and a “key” to the alleged appraisal deficiencies (these two documents come from the lawsuit complaints filed in court as well). The notices do not identify who is sending them. (more…)