The Federal Deposit Insurance Corp. has filed a complaint against Lender Processing Services and CoreLogic related to appraisals performed for Washington Mutual, HousingWire reported May 11. The FDIC is seeking to recover roughly $283 million in losses allegedly tied to appraisals that an LPS subsidiary and a CoreLogic affiliate conducted for WaMu.
The FDIC took WaMu into receivership in 2008 and facilitated its sale to JPMorgan Chase. WaMu had a total of $307 billion in assets at the time.
HousingWire reported that regulatory filings by the two companies indicate that the FDIC alleged LPS Appraisal LLC and CoreLogic Valuation Services, formerly known as eAppraiseIT, breached a contract with WaMu, claiming services provided to the bank allegedly broke federal and state law, regulatory guidelines and industry standards.
Appraisal Institute Government Relations Committee Chair Richard Maloy, MAI, SRA, responded to news of FDIC’s complaint. “Residential appraisers should be very careful in signing agreements that add them to the chain of indemnification,” he said. “AMCs attract customers partly by promising what amounts to alternative mortgage insurance. Some specifically mention ‘value insurance’ and then foist the liability off on a professional appraiser and the appraiser’s E&O insurer. Knowing that there is a contractually arranged loss indemnification on the part of the AMC, which then brings in the appraiser, is simply not worth the risk.”
The FDIC cites 220 residential appraisals performed by the LPS appraisal management company between June 2006 and May 2008 as the source of the damages and 194 appraisals by the CoreLogic affiliate between 2006 and 2007, according to HousingWire’s article.
CoreLogic said in a regulatory filing May 11 that it has begun a review of the 194 cases and said more than 85 percent of the loans cited consisted of reviews of third-party appraisals, with most being “desk reviews.” LPS also said in its May 10 regulatory filing that its cases largely involved desk reviews. Both companies said they would defend themselves.