from an article in Appraiser News...
“FDIC Sues LSI Appraisal, Corelogic and Parent Companies For Negligence in Providing Appraisal Services
The FDIC is reported to be suing the above companies in what appears to be an increased focus by the federal government to prosecute some of the securitization players who may have contributed to the mortgage crisis. Separate lawsuits are reported against each of the companies for actions including negligence in providing appraisal services, multiple violations of USPAP (Uniform Standards of Professional Appraisal Practice) and other breaches of contract for providing defective appraisals.
Isaac Gradman, writing for The Subprime Shakeout on May 31st, reported that the FDIC was seeking at least $154 million from LSI and at least $129 million from CoreLogic. He noted that the FDIC was suing the two companies only for the amount that WAMU still holds on its books. Mr. Gradman goes on to say that: “In the case against LSI, the FDIC only reviewed 292 appraisals and is seeking damages with respect to 220 of those (75.3%), for which it claims it found “multiple egregious violations of USPAP and applicable industry standards” (LSI Complaint p. 12). Only 10 out of 292 (3.4%) were found to be fully compliant. Yet, the FDIC notes earlier in that complaint that LSI “provided or approved more than 386,000 appraisals for residential loans that WaMu originated or purchased” (LSI Complaint p. 11).
In the case against CoreLogic, the FDIC says that it reviewed 259 appraisals out of the more than 260,000 that had been provided (CoreLogic Complaint pp. 11-12). Out of those, it found only seven that were fully compliant (2.7%), while 194 (74.9%) contained multiple egregious violations (CoreLogic Complaint p. 12). And it was the 194 egregiously defective appraisals that the FDIC alleges caused over $129 million in damages.
Can you see where I’m going with this? If you assume that the rest of the appraisals looked very similar to those sampled by the FDIC, there’s a ton of potential liability left on the table”.
While Mr. Gradman notes that the small percentage of appraisals reviewed may not be representative of the entire pool, he notes the staggering potential liability to the firms with figures running into tens of billions of dollars.
Links to Mr. Gradman’s article along with a prior report by Peter Christensen of the Appraisal Law Blog are found here: The Subprime Shakeout
Appraiser Law Blog: FDIC News”
The active url for the first for the first link above is: http://www.subprimeshakeout.com/
I urge all readers to visit Mr. Gradman’s blog site above. He really seems to have done his homework. A copy of the full court complaint can be found at the above links. Well done!