UPDATE - Minimum Requirements for Appraisal Management Companies - Rule in the Works

UPDATE! 03/24/2014- Link to proposed rule is available at the end of this post.

During their regular monthly board meeting on March 20, 2014 the National Credit Union Administration proposed an interagency rule to implement minimum requirements for state oversight of appraisal management companies. Six other federal agencies are expected to join in support of the proposal. These include the Federal Reserve, CFPB, Treasury Department, FDIC; Federal Housing Finance Agency and Office of the Comptroller of the Currency.

The text of the proposed rule will not be available until all the agencies approve the language, but the NCUA Board Action Memorandum states:

The minimum requirements in the proposed rule would apply to States that elect to establish an appraiser certifying and licensing agency with the authority to register and supervise AMCs (participating States). Under the proposed rule, participating States would have to require that AMCs: (1) register in the State and be subject to its supervision; (2) use only State-certified or licensed appraisers are used for Federally related transactions (real estate-related financial transactions overseen by a Federal financial institution regulatory agency that require appraiser services); (3) require that appraisals comply with the Uniform Standards of Professional Appraisal Practice; (4) ensure selection of a competent and independent appraiser; and (5)establish and comply with processes and controls reasonably designed to ensure that appraisals comply with the appraisal independence standards in the Truth in Lending Act.

The proposed rule would direct AMCs that are subsidiaries of banks and regulated by a Federal financial institution regulatory agency to meet the same minimum requirements, although such AMCs would not be required to register with a State.

We'll keep our eyes open, and post the proposed rule as soon as we see it published.

UPDATE! The proposed Interagency Rule is available at THIS LINK.

FDIC and LSI Appraisal, LLC Settle

The start of 2014 has been very interesting for Appraiser Active. The assignments are challenging and interesting, The opportunity to work with some awesome appraisers from around the country has been a real treat. Unfortunately, the nature of the assignments, and time demanded by them has kept me from this page.

My blogging time is still very limited, and protective orders keep me from posting quite a bit, but many readers will be interested in the pdf at this link.

Here is a preview. Draw your own conclusions.

eAppraiseIT Settlement - Is it Over?

Over the past few days the wire services, appraisal blogs and real estate news sites have shared the headline:  

"WaMu apprasial company settles with New York"

Bullet points from the story include:

* eAppraiseIT accused of inflating home appraisals
* Agrees to pay $7.8 million to end lawsuit
* eAppraiseIT now part of CoreLogic Inc
* NY AG Schneiderman took case to trial
* Schneiderman to bring new mortgage-related action soon

According to the story:

The case, filed in New York state court in 2007, is one of the few related to the housing meltdown that the government has brought to trial. The trial was in recess when the settlement was reached.

Schneiderman is co-chair of the federal mortgage fraud task force formed in January to probe actions that led to the financial crisis. He has said he plans to take legal action against other targets soon.

Homes that were appraised above their value, allowing mortgage companies to issue bigger mortgages, are among the causes cited by experts for the housing bubble and subsequent financial crisis.

EAppraiseIT, a major appraisal management company during the housing boom, was accused of colluding with Washington Mutual, which had been of the largest U.S. mortgage lenders until the housing market collapsed.

Appraiser Active covered the story after the suit was filed by then New York Attorney General, Andrew Cuomo. As a result of the suit, we appraisers have endured the Home Valuation Code of Conduct, and are now struggling under the effects of appraiser independence provisions in the Dodd - Frank legislation.

Does the New York settlement with eAppraiseIT signal the end of the story? Not by a long shot. There are at least two high profile cases involving eAppraiseIT in the system.

FDIC v. CoreLogic 

In another sign that the Federal Government is turning its focus towards prosecuting the securitization players who may have contributed to the Mortgage Crisis, the FDIC filed separate lawsuits against LSI Appraisal (available here) and CoreLogic (available here) earlier this month.  In the suits, both filed in the Central District of California, the FDIC, as Receiver for Washington Mutual Bank (“WAMU”), accuses vendors with whom WAMU contracted to provide appraisal services with gross negligence, breach of reps and warranties, and other breaches of contract for providing defective and/or inflated appraisals.  The FDIC seeks at least $154 million from LSI (and its parent companies, including Lender Processing Services and Fidelity, based on alter ego liability) and at least $129 million from CoreLogic (and its parent companies, including First American Financial, based on alter ego liability).

Spears v. First American eAppraiseIT, LLC

The United States District Court for the Northern District of California granted class certification in a mortgage loan appraisal suit alleging defendants conspired to inflate appraisals to increase the sale of loans in the secondary market. 

The Court found that plaintiffs presented sufficient evidence to establish common questions of fact and law, holding that common questions and answers need not uniformly apply to all class members. The Court also found that the analysis of individual appraisal fees would not create individualized issues, but instead would provide additional support for plaintiffs’ claims that an inflated appraisal scheme existed. Finally, the Court also held that the Real Estate Settlement Procedures Act’s treble damages, attorney’s fees and government enforcement mechanisms did not make class action an inferior method of litigation.

The CASE FILE is available at this LINK. More information about the suit, and a means for parties to join the class at this LINK.

Maybe there are more in the pipeline. Let me know if you are aware of additional suits filed in other jurisdictions. It will be interesting to see how these all shake out.

Consumer Financial Protection Bureau: Two Appraisal Related Proposed Rules

This week, the Consumer Financial Protection Bureau (CFPB) issued notice of two proposed rules affecting appraisals and consumer access to appraisal reports. Follow the links for the full text and to submit a comment to the CFPB.

First:

The Bureau of Consumer Financial Protection (Bureau) is proposing to amend Regulation B, which implements the Equal Credit Opportunity Act (ECOA), and the official interpretation to the regulation, which interprets the requirements of Regulation B. The proposed revisions to Regulation B would implement an ECOA amendment concerning appraisals that was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In general, the proposed revisions to Regulation B would require creditors to provide free copies of all written appraisals and valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. The proposal also would require creditors to notify applicants in writing of the right to receive a copy of each written appraisal or valuation at no additional cost. 

Click HERE for Proposed Rule

Submit a Comment on Proposed Rule

Second:

The Board, Bureau, FDIC, FHFA, NCUA, and OCC (collectively, the Agencies) are proposing to amend Regulation Z, which implements the Truth in Lending Act (TILA), and the official interpretation to the regulation. The proposed revisions to Regulation Z would implement a new TILA provision requiring appraisals for “higher-risk mortgages” that was added to TILA as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. For mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the proposed rule would require creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used.

Click HERE for Proposed Rule

Submit a Comment on Proposed Rule

Dodd-Frank Wall Street Reform and Consumer Protection Act - Now, the Rules

In support of one of my observations about H.R. 4173, Dodd-Frank Wall Street Reform and Consumer Protection Act, the following quote from an editorial in today's New York Times is offered:

Read the whole thing.

The Federal Reserve must now translate the legislative language into rules that will govern how brokers, lenders, appraisers and investors behave from now on. Given the Fed’s long history of putting the financial industry first and consumer protection second, Congress will need to keep a close eye on the rule-making process.

The expectation that Congress will "keep a close eye" on anything is a stretch, however. WE must keep a close eye on the rule-making.

Although the FED will be writing the interim rules, all the Federal Banking Regulatory Agencies will be participating in the final rules. The FDIC has issued a statement announcing an "Open Door Policy for Regulatory Reform Rule-making." Time to subscribe to their emails and notices.

Head's Up!!

This just posted over on the Appraiser Law Blog. Authors are attorneys with LIA Administrators & Insurance Services.

The Single Biggest Liability Threat to Appraisers: the FDIC


By Peter Christensen
 
The single biggest liability threat to both residential and commercial appraisers is the Federal Deposit Insurance Corporation. The FDIC held a conference last week in Chicago for law firms interested in representing the FDIC. What came out of that conference made me very anxious for appraisers, but it's much more than just a threat to individual appraisers. What the FDIC is doing hampers the ability of the appraisal profession to deliver accurate valuations going forward. The reason is: if you're an appraiser doing work for a lender (which may or may not be one of the 700+ troubled banks on the FDIC's watch list), you know your risk of being sued by the FDIC for overvaluation in hindsight is eliminated by "coming in low" on the appraisal. That means more loans don't get made. 

The FDIC has taken over more than 200 banks since the beginning of the mortgage crisis. When the FDIC takes over a failed bank, it usually sells off the banking assets to an existing lender but retains all of the potential legal claims against the failed lender's directors, officers, mortgage brokers, accountants, lawyers, appraisers, AMCs, etc. The FDIC is now in the business of suing these parties, blaming them for its failed banks' bad lending practices.

Read the whole thing...

Sorry for the light posting lately. I've been swamped with appraisal and consulting assignments, and have been working on getting HB 303 and S 2210 (Regulation of Appraisal Management Companies) passed in the Florida Legislature. Both are on the 2nd Reading Calendar as of today.
 
Expect more information soon.

Security One Valuation Services - November 2nd UPDATE from Todd Barfield

It's been about a month since the last post with an update from Todd Barfield about the checks issued by Security One Valuation Services, LLC. Although the number of comments has tailed off, plenty of folks continue to email me with questions.

In response to an email sent to Todd over the weekend, this response was received today:

Email from FDIC to SecurityOne October 15, 2009

I can only answer your question on the release of funds: investigations should be completing the review of this account by the end of next week. If it turns out that the FDIC has no claim against this account, the funds will be released immediately.

From FDIC to SecurityOne October 23, 2009

Investigations is in the process of releasing holds. Yours has not been cleared yet. Thank you

There has been no further correspondence from the FDIC

That's all I have right now. If there is anything new, I'll let you know.

Sorry for the light posting and lack of updates. We have been swamped with a bunch of interesting assignments. When time permits, there is some news to post.