Opinion ID: 858507
Heading Depth: 2
Heading Rank: 3

Heading: The Sherman Property

Text: At the time of Wendlandt’s sentencing, the Sherman property already had gone into foreclosure, requiring HUD to reimburse the mortgage lender $159,337.22 in loan proceeds and foreclosure costs. The district court found by a preponderance of the evidence that the government’s appraisal of $19,900 represented a reasonable estimate of the property’s fair market value and, subtracting this valuation from HUD’s reimbursement costs, found the loss amount to be $139,437.22. Wendlandt contends that because this mortgage was a refinance obtained by the borrower in order to lower payments so that he could afford to keep the property, the district court should have subtracted from the loss an amount equal to the outstanding balance on the original loan at the time of refinancing—that is, if the original loan was HUD-insured. Wendlandt reasons that if this factual predicate is true, HUD was already “on the hook” for the original loan. He further asserts that his proffered fair market value of $60,000 is more accurate than the government’s liquidation value of $19,900. Whether or not HUD insured the original loan to purchase the Sherman property is of no moment. HUD agreed to insure the refinance on the basis of Wendlandt’s fraudulent representations; absent these falsities, HUD would never have insured the buyer. HUD’s obligation to pay on the lender’s claim is directly attributable to Wendlandt’s wrongdoing. Moreover, the district court’s adoption of the government’s $19,900 fair market value is entitled to appropriate deference. It was derived from the testimony of appraiser Coon, who looked at comparable properties in the area that sold for prices between $5,900 and $87,500. The median value of the sale prices for all of these similarly situated properties was $19,900. At the time of sentencing, the Sherman property had not yet sold, and HUD did not have it on the market. Coon testified that HUD No. 11-2018 USA v. Wendlandt Page 12 previously had listed the house twice—at $16,000 and then at $22,000, albeit in a relatively short time period. She concluded that $19,900 represented the fair market value of the property. Although Wendlandt’s appraiser Karen Leppek arrived at a much higher fair market value, Coon’s estimate represented an equally valid estimate of the property’s fair market value using a standard appraisal method. To the extent Wendlandt complains that the government’s valuation is an unfair “fire-sale” price and that we are bound to follow the burden-shifting commercial reasonableness standard in United States v. Willis, 593 F.2d 247, 258–59 (6th Cir. 1979), we disagree. Willis is inapposite. It involved the collection of a lawful secured debt and the commercially reasonable disposition of collateral pursuant to the requirements of the Uniform Commercial Code. The sentencing Guidelines contain no such requirement and call for only a reasonable estimate of the fair market value. See United States v. Lacey, 699 F.3d 710, 720 (2d Cir. 2012) (“While a fact-finder would be entitled to take into account the distressed circumstances of ‘underwater’ property owners in deciding whether a short-sale price accurately reflects the fair market value of the property, no rule of law disqualifies such a sale as evidence of the fair market value.”). In sum, we find nothing in the district court’s calculation of loss under § 2B1.1 that renders Wendlandt’s sentence procedurally unreasonable.