Source: https://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2012/03/index.html
Timestamp: 2019-04-18 12:57:40+00:00

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I have described below the 8 biggest appraiser liability cases with which I am familiar that are currently pending in the U.S. These are cases that specifically name appraisers, appraisal firms or appraisal management companies as defendants. That's an important distinction because the appraisal industry has been fortunate that only a small fraction of litigation about financial losses blamed on appraisal deficiencies actually names any appraisal defendants. Yet, the stakes below are very significant for the appraisal industry because the realistic measure of damages at issue in just these 8 cases -- not the plaintiffs' puffed-up alleged damages -- is more than what the whole industry paid last year for its professional liability insurance on a collective basis, by a factor of 3 or 4.
The cases below are ranked based on the approximate alleged damages demanded by the plaintiffs or the proposed settlement amount. The first two cases involve incredible damage claims, but I wouldn't draw any conclusions about those two cases, other than the fact that they show appraisers are very much at risk for big claims made by parties who are neither their clients nor intended users. The plaintiffs' claims in those two cases are outlandish.
One thing that is remarkable overall about these appraiser litigations is that they continue to be filed long after the peak of the real estate bubble and beginning of the lending crisis in 2006-2007. Most of the claims in these cases concern appraisals delivered in 2005-2006. See related article on www.readimember.org (registration is required and limited to appraisers): "What is the Statute of Limitations for a Lawsuit Against an Appraiser in My State?"
$8 billion alleged damages. Luxury resort development appraisals. Property owners v. lender and appraisal firm. Filed January 2010.
$2 billion alleged damages. Luxury resort development appraisal. Borrower v. lender, appraisal firm and appraiser. Filed February 2012.
$250 million alleged damages. Luxury resort development appraisal. Hedge fund loan investors v. appraisal firm. Filed October 2011.
$153 million alleged damages. 219 residential appraisals. FDIC v. AMC. Filed May 2011.
$129 million alleged damages. 194 residential appraisals. FDIC v. AMC. Filed May 2011.
$75 million pending settlement. FHA residential appraisals. Whistleblower appraiser v. lenders, AMC and individual managers. Filed May 2009, settlement pending.
$48 million alleged damages. Residential appraisals. Lender v. mortgage originator and appraisers. Filed 2010.
$20 million alleged damages. Industrial property appraisal. Tenancy-in-common investors v. appraisal firm and appraisers. Filed 2010.
The NY attorney general's suit filed in 2007 against a national AMC is still pending, but the NY attorney general does not appear to be seeking compensatory damages and is seeking instead statutory penalties or restitution in amounts that have not been specified in public documents.
ANNAPOLIS, Md., Mar 01, 2012 (BUSINESS WIRE) -- Appraisal Logistics, the leading provider in compliance risk management for appraisal independence, announced today the availability of its proprietary Internal Management Cost Calculator built to uncover the true cost behind internal appraisal management. Using this calculator, lenders will be able to determine the most appropriate avenue for achieving and maintaining appraisal independence standards by exploring an alternative appraisal strategy.
The Cost Calculator breaks down the internal management process line-by-line so that users can input specific data and receive a true estimate of bottom line cost. The calculator takes into account overall loan and appraisal volume, appraisal management platform costs (if any), appraisal fees, dedicated staff salaries and operations requirements for working independently of loan processing staff.
Birgitta Natale, Mortgage Operations Manager for United Nations FCU said, "We spent eight months going through a careful appraisal management review and selection process. We determined there would be significant advantages to outsourcing the management process, and in fact, managing the process internally would increase our risk -- we need specialists to keep up with moving regulatory targets. Throughout this process, we were able to reduce our overall cost per loan, produce stronger appraisals and decrease our compliance risk."
Appraiser independence standards within the Dodd-Frank Act, known as AIR, is a code of conduct that now applies to all mortgage financing. Lenders are required to ensure appraisal independence in order to support the industry's goal of reasonable financing. According to the Interagency Appraisal and Evaluation Guidelines, "an institution should not select a valuation method or tool solely because it provides the highest value, the lowest cost, or the fastest response or turnaround time.
Frank Danna, CEO with Appraisal Logistics said, "Independently, these criteria will not provide complete compliance coverage, or a quality appraisal. Furthermore, the Guideline states that loan production staff cannot be at all associated with the appraisal review process. For smaller community banks with fewer dedicated staff, it becomes challenging to differentiate between loan production and appraisal management. This management calculator provides institutions with a means to investigate the actual expense of an in-house appraisal process. If lenders are not investigating their options in some form, then it is a missed opportunity to quantify what current expenses are, and could be, by selecting a different approach."
Frank Danna, CEO for Appraisal Logistics, will be a featured speaker in Valuation Review's upcoming educational webinar, "The Perfect Appraisal: Building A Reputation That Feeds Business Growth" on March 8 at 2 p.m. ET. Click here to register for the event.
Appraisal Logistics is the leading provider in compliance risk management for appraisal independence. With a team of industry experts and a nationwide network of highly qualified and trusted appraisers, Appraisal Logistics provides immediate and exceptional service to regional and community banks and standalone mortgage originators to ensure each appraisal is 100 percent compliant in a customized, customer-focused environment. For more information, please visit www.gotoals.com or call (443) 949-7862.

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