Thursday, April 16, 2009

SHOCKING!!: AMC - Appraiser Agreements and Indemnity


Please take a look at the Appraiser Legal Defense and Insurance Blog. They have posted an informative piece about AMC/Appraiser Agreements and the ever-more popular Indemnity Provisions. Their post spotlights an agreement used by TSI Appraisal Services.


They say:

We are receiving many calls from our insured appraisers about AMC agreements. Many of our calls in the last fews days have concerned the TSI Appraisal Services Appraiser Agreement. This agreement is worth looking at because, though more extreme than others in its one-sided wording, it illustrates the typical legal problems for appraisers found in AMC agreements.With regard to the TSI agreement, appraisers are particularly concerned about the indemnity section. Indemnity provisions are a recurring issue with AMC agreements. The bottom line is they are usually an AMC's attempt to shift potential liability by contract from the AMC to the appraiser. Because of the current mortgage crisis, this attempted shifting of liability is occurring more than ever.
...and go on

The first paragraph of section 7 requires, in part, that the appraiser "indemnify, defend, save and hold harmless [TSI] from and against any and all liability, claims, damages, penalties, losses, fines, judgments . . . [and] any other costs, fees and expenses . . . in any way related to . . . [among other things] any appraisal report submitted to [TSI] by Appraiser pursuant to this Agreement." Simply construed, this means the appraiser is promising to pay TSI for any cost or loss of any kind (including criminal or civil fines ordered against TSI) for anything related to an appraisal submitted by that appraiser. This is an unusually broad indemnity provision because TSI could conceivably take the position that the appraiser is required to indemnify TSI for losses caused by TSI itself in handling an appraisal or resulting from TSI's own negligence. For example, if TSI conveyed erroneous instructions to the appraiser which resulted in a problem with the appraisal and the lender client demanded that TSI make up a resulting loss, TSI could conceivably demand that the appraiser pay TSI for TSI's own mistake.
...and how about this gem related to Mortgage Repurchases?

Another significant issue is raised in the second paragraph of section 7. In this part, the appraiser "agrees that if a mortgage lender is required to repurchase a mortgage loan for any reason in any way related to [among other things] . . . any appraisal report submitted by Appraiser pursuant to this Agreement, Appraiser shall pay [TSI] an amount equal to the repurchase price paid by such mortgage lender to repurchase such mortgage loan." The appraiser is further required to "pay the reasonable attorney’s fees of [TSI] incurred in enforcing Appraiser’s obligations hereunder, including, with [sic] limitation, the obligation of Appraiser to pay [TSI] an amount equal to the repurchase price of a mortgage loan as set forth above."

4 comments:

Tim said...

Frank,

Thanks for keeping us up-to-date on issues such as this one about E&O insurers.

The issue of HVCC and how it will impact residential appraisers is still up in the air since it has not yet gone into effect and NAR's suit to postpone it one year still has to be litigated. However, these two areas of uncertainty notwithstanding, it is reasonably clear that the HVCC in its present constitution is not the residential real estate appraiser's friend.

One evidence of this enmity is the issue you raise here about E&O insurers and their desire to have their appraiser clients insure them against any losses that may occur if the appraiser finds him- or herself afoul of HVCC.

I sincerely hope that if Florida eventually regulates AMCs, it is able to stop abuses, such as this one, of the State's residential real estate appraisers.

Again, thanks for keeping us posted!

Timothy C. Andersen, MS, MAI

Tim said...

Frank,

Thanks for keeping us up-to-date on issues such as this one about E&O insurers.

The issue of HVCC and how it will impact residential appraisers is still up in the air since it has not yet gone into effect and NAR's suit to postpone it one year still has to be litigated. However, these two areas of uncertainty notwithstanding, it is reasonably clear that the HVCC in its present constitution is not the residential real estate appraiser's friend.

One evidence of this enmity is the issue you raise here about E&O insurers and their desire to have their appraiser clients insure them against any losses that may occur if the appraiser finds him- or herself afoul of HVCC.

I sincerely hope that if Florida eventually regulates AMCs, it is able to stop abuses, such as this one, of the State's residential real estate appraisers.

Again, thanks for keeping us posted!

Timothy C. Andersen, MS, MAI

Anonymous said...

These are the folks that fire you if you tell them you must follow USPAP and abide by state law.

Anonymous said...

Any appraiser thinking of joining TSI should think again. I closed a company that I had established over the course of 20 years. I was forced to dissolve the company to join TSI. 3 months in I was terminated with no explanation. DO NOT DO IT!