Verdict on Lehman Bros vs. Passarelli & Potts

[Ken B]

Guess I forgot to put the <rant> code around it - of course I know legally it wouldn't hold up, but I'm just sick of everyone looking to the appraiser when things go bad. Too many appraisers are getting sued that didn't do anything wrong, but hey, they've got E&O so let's go after them. My rant was a "screw all of you I'm sick of this" not a legal theory. </rant>

If the appraiser is a primary cause for "things going bad", shouldn't they be held responsible? Isn't one of your goals to remove "Skippy" appraisers from the profession.

No accusations are made towards anyone, past or present.

 

[Fred]

After reading thru this thread and the case info I have to agree with PE in that my biggest concern is not the increase "intended users" but rather that the court relied upon a valuation as of a different effective date than the effective date of the original appraisal report. To me this sets the potential for a bad precedent.

I'll take one last stab at this. It does no good to rationalize this with appraiser-logic and parse value, and value dates. Once negligence is established, the flood gates are open, and loss that occurs after the point of negligence - and more (punitive damages) - can be part of the damages. Anyone here famaliar with lawsuits against, say, uh, tobacco companies, car companies? Plaintiffs who lost 72 cents ask for billions. Didn't some doctor in Alabama get $7 mil when they painted his Benz the wrong color? (do you think that resembled the change in value of the car)?

 

[Mike Kennedy]

Mike, weren't you the one trying to explain to me how "portable" appraisals don't increase appraiser liabilty? Doesn't this case punch yet another iceberg size hole your Titanic?

Scope of Work/Fannie Form/Intended Use

Steven ..........once a residential mortgage lending appraisal is executed on a fannie form - be it for VA, FHA, fannie, the Liability already exists. Portability similar to "any VA approved lender" .......for fannie assignments ......does not INCREASE the existent liability. :icon_idea:

 

[PropertyEconomics]

I'll take one last stab at this. It does no good to rationalize this with appraiser-logic and parse value, and value dates. Once negligence is established, the flood gates are open, and loss that occurs after the point of negligence - and more (punitive damages) - can be part of the damages. Anyone here famaliar with lawsuits against, say, uh, tobacco companies, car companies? Plaintiffs who lost 72 cents ask for billions. Didn't some doctor in Alabama get $7 mil when they painted his Benz the wrong color? (do you think that resembled the change in value of the car)?

All instances would reflect "actual" and "punitive" damages woudnt they Steven? My arguments are more toward "actual" as punitive damages can be any number .. as your post shows. I would think accurate calculation of "actual" would have been important to the court. Then again, apparently not.

 

[Fred]

WilliamK,

The greater lesson here is that the Courts dont give at Rat's Patooey what the TAF/ASB has written or has to say about these issues unless they choose to do so.

I disagree with that. I don't see any court abandonment or contradiction of anything in USPAP in this case. (See earlier posts).

And to the contrary, courts uphold USPAP. From the Supreme Court on down, precedent is that evidence about value has to be developed in accordance with generally accepted standards (USPAP).

 

[Mike Kennedy]

Let's say an appraiser reports a property's value is $100 bucks. A review of the appraisal reveals that a credible value as of the effective date of the appraisal was $35 bucks.

A year later, the lender begins foreclosing on the properties as purchasers realize they were scammed. Due to an appreciating market, a credible value when the lender begins to take possession of the properties is $50 bucks. Upon the date the lender takes possession of the properties the realized loss is $50. Upon the effective date of the appraisal, the appraisal was "off" by $65 bucks.

Should the appraiser be liable for $50 or $65 bucks?

Let's say there is a depreciating market in the year between funding and initiation of foreclosure proceedings. As of the date the lender begins to take possession of the properties, a credible value is $25.

Should the appraiser be liable for $65 or $75 bucks?

based on the Effective Date of the Original appraisal - $65 assuming the Review was Competently executed.

"A review of the appraisal reveals that a credible value as of the effective date of the appraisal was $35 bucks."

 

[Carnivore]

Scope of Work/Fannie Form/Intended Use

Steven ..........once a residential mortgage lending appraisal is executed on a fannie form - be it for VA, FHA, fannie, the Liability already exists. Portability similar to "any VA approved lender" .......for fannie assignments ......does not INCREASE the existent liability. :icon_idea:

The world is are master. Does this mean the confidentiality provision of USPAP is out the window? :new_all_coholic:

 

[Mike Kennedy]

USPAP Confidentiality
"An appraiser must not disclose confidential information or assignment results prepared for a client to anyone other than the client and persons specifically authorized by the client; state enforcement agencies and such third parties as may be authorized by due process of law;

client by name OR TYPE applies.

CLIENT: the party or parties who engage an appraiser (by employment or contract) in a specific assignment.
Comment: The client identified by the appraiser in an appraisal, appraisal review, or appraisal consulting assignment (or in the assignment workfile) is the party or parties with whom the appraiser has an appraiser-client relationship in the related assignment, and may be an individual, group, or entity. <<<<<

SOW issue.


http://commerce.appraisalfoundation.org/html/USPAP2008/AOs/ao_30_obligations.htm

“If an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the property or the transaction.”


“A regulated institution also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution, if:


(i)
The appraiser has no direct or indirect interest, financial or otherwise, in the property or the transaction; and


(ii)
The regulated institution determines that the appraisal conforms to the requirements of this subpart and is otherwise acceptable.”

 

[Fred]

All instances would reflect "actual" and "punitive" damages woudnt they Steven? My arguments are more toward "actual" as punitive damages can be any number .. as your post shows. I would think accurate calculation of "actual" would have been important to the court. Then again, apparently not.

I can't get specific - compensatory, punitive, emotional pain and suffering. I don't know enough law in general and whatever state this is. My point is that your calculatons may be reasonable, but the people empowered to make the calculations are not bound to stick by the "rules" that would govern someone thinking in terms of "fair" market value. They have their own rules. I am very sure that one way or another, they are not limited to 100% of what anyone of us think is the "actual" loss. And I have no idea what it cost to appeal the judgement, but it's probably not less than $50k.

 

[Ken B]

based on the Effective Date of the Original appraisal - $65 assuming the Review was Competently executed.

"A review of the appraisal reveals that a credible value as of the effective date of the appraisal was $35 bucks."

But doesn't that absolve the appraiser from the additional damages created by the lender's decision to fund an amount based upon a value which was not credible? The appraiser is not being held responsible for damages due to a declining market. The appraiser is being held responsible for damages resulting from a decision to fund a loan based upon an appraised value which was grossly above market value around the time of funding.

Perhaps the loans would not have gone bad if the lender had funded them at a reasonable LTV based upon the results of a credible appraisal. Shouldn't the appraiser be responsible for the consequences of his actions?