Judge Rules Appraiser/Lender Owe no duty of care

[Mike Ault]

Which explains how appraisers/lenders are bypassing these FHA requirements since there are 34 other transactions in my neighborhood and surrounding alone with properties that have septic and well on less than an acre that cannot physically meet the distance requirements. How do they close? Appraiser/Lender lie.

In Texas, any subdivision platted before 1986 is exempt from the 1 acre minimum lot size restriction regarding well/septic systems. So, no way of knowing if there's any "separation distance issues" with your neighbors or not from that information. If you have the time, you could investigate how many of those closed with FHA financing, inform the occupants of those homes about your problem, & ask if they have experienced any similar issues. That would help bolster your case. At least a decade or so ago, there was one newly developed subdivision somewhere around San Antonio which was developed on "fill dirt" that was not properly compacted. Predictably, after a couple of years, all those home foundations started cracking & settling beyond what can be typically expected for newly constructed homes. A substantial number of those homes sold with FHA financing. When the affected homeowners started comparing notes, come to find out the large tract home builder who had built & sold the majority of the homes in that development had been lying about the fill dirt issue on the 92051 HUD Builders Certification form, and no appraiser had caught it. Most of them probably didn't even know that they were supposed to be reviewing that form during their site visit, and noting any discrepancy which they observed for further follow-up by the lender. A class-action suit was launched, presumably settled, and then all references to it were removed from the Internet. Never did find out how it settled out. When HUD disbanded their old appraiser panel and went to the "lender select" system, they also quit training appraisers. One of my friends at the HUD field office told me, "the lenders promised us they would handle all the training for their FHA appraisal issues from now on". Of course, my friend was bitter about the immediate onslaught of poor quality FHA appraisals they were forced to accept from that point forward.

 

[Raven59]

I am trying to find the reference, but HUD's site is down, and I cannot get to 4000.1.

According to HUD Handbook 4000.1, the Federal Housing Administration (FHA) may consider a property eligible for an FHA-insured mortgage if the local or state requirements for distance between the well and septic system are less stringent than the FHA's standards under certain conditions. While the FHA has established minimum property standards, there may be cases where local or state regulations differ. Typically, FHA standards take precedence over local standards. However, exceptions can be made if the local standards are determined to provide equivalent safety and health protections. The lender must provide evidence that the property complies with local or state distance requirements. This evidence typically includes documentation from the local health authority or other relevant regulatory bodies confirming that the property's well and septic system distances meet local standards.

If everything in the neighborhood has the same issue, it seems FHA provides an out for you.

 

[George Hatch]

The fact that she checked the box that they did not exist as well as cropped them out of every angle in every picture used in the appraisal and refused to provide all original photos taken at the property proves it.

Just so we're communicating on the same page, most people would understand "cropping" to involve altering an existing pic. Zooming in on a particular angle/distance could otherwise be described as "framing" in that they would be choosing the image at the viewfinder.

Either could be interpreted as indicative of intent so I guess any distinction might not matter.

As for what might be available in the way of a workfile, this is what our professional standards have always said about that:


If there's an adversarial proceeding where the lawyers are going to parse semantics it could be argued that the pics presented in the report support satisfy that "necessary to support" requirement as far as what an appraiser is required to retain. The appraiser could claim those were the images they took and those were the images that mattered to them in their analysis. Proving otherwise will be hard. That doesn't necessarily prove or disprove that the were aware of the septic having an unacceptable location. It doesn't prove anything other than what they transmitted to their client. Non-cooperation isn't an admission of guilt.

That's what lawyers do - advocate for their own client and their own case. Lawyers aren't expected to act like a non-advocate. If they can identify the dividing line and they decide there is no upside to providing any more than is required then they're usually going to do that. That's how our legal system works. The burden of proof rests with the accuser, not the accused. The appraiser is under no obligation to help you prove your case.

 

[Huds_Harm]

Obviously you're the attorney.
Typical buyers do no understand the details you know about appraising.
You should have been honest in forthcoming that you came to AF to get support for your case.

I am not the attorney, but that is the exact reason this has not come to light. What typical buyer goes into depth on what SHOULD have been done?

What typical FHA buyer has not only the financial means but the mental strength it takes to pursue HUD for three years to the point where they change their defect taxonomy?

How many FHA buyers' homes have foreclosed because HUD does not tell them or hold anyone accountable to what SHOULD have been done because like their recent job posting says

Perform a variety of supervisory functions to ensure that the duties and responsibilities performed by subordinate staff members are completed with promptness and efficiency and have a positive impact on the Processing and Underwriting Division with regard to production, timeframes, and the overall image of the Office and HUD FHA.”

HUD does not care about the health and safety of the occupant nor does it have the best interests of the low income borrower at heart.

And if I get nothing from this, at least it prompted a change so that the next person does.

 

[Huds_Harm]

In Texas, any subdivision platted before 1986 is exempt from the 1 acre minimum lot size restriction regarding well/septic systems.

They may be "grandfathered" for conventional loans but on an FHA loan they do not qualify.

 

[Huds_Harm]

I am trying to find the reference, but HUD's site is down, and I cannot get to 4000.1.

According to HUD Handbook 4000.1, the Federal Housing Administration (FHA) may consider a property eligible for an FHA-insured mortgage if the local or state requirements for distance between the well and septic system are less stringent than the FHA's standards under certain conditions. While the FHA has established minimum property standards, there may be cases where local or state regulations differ. Typically, FHA standards take precedence over local standards. However, exceptions can be made if the local standards are determined to provide equivalent safety and health protections. The lender must provide evidence that the property complies with local or state distance requirements. This evidence typically includes documentation from the local health authority or other relevant regulatory bodies confirming that the property's well and septic system distances meet local standards.

If everything in the neighborhood has the same issue, it seems FHA provides an out for you.

Correct they will accept going from 100ft between septic and well to 75 minimum. This property is 66

 

[George Hatch]

Then it should be used for that and not allowed to be used to escape accountability when there are clear errors and omissions.

You keep saying that without apparently realizing that the appraiser is completely accountable to their client and their intended users.

I have repeatedly stated I sued for negligence and the appraiser has openly admitted to the error and omission.

Negligence might get you access to their E&O. "intentional fraud" might not.

 

[Huds_Harm]

Just so we're communicating on the same page, most people would understand "cropping" to involve altering an existing pic. Zooming in on a particular angle/distance could otherwise be described as "framing" in that they would be choosing the image at the viewfinder.

Either could be interpreted as indicative of intent so I guess any distinction might not matter.

As for what might be available in the way of a workfile, this is what our professional standards have always said about that:


If there's an adversarial proceeding where the lawyers are going to parse semantics it could be argued that the pics presented in the report support satisfy that "necessary to support" requirement as far as what an appraiser is required to retain. The appraiser could claim those were the images they took and those were the images that mattered to them in their analysis. Proving otherwise will be hard. That doesn't necessarily prove or disprove that the were aware of the septic having an unacceptable location. It doesn't prove anything other than what they transmitted to their client. Non-cooperation isn't an admission of guilt.

That's what lawyers do - advocate for their own client and their own case. Lawyers aren't expected to act like a non-advocate. If they can identify the dividing line and they decide there is no upside to providing any more than is required then they're usually going to do that. That's how our legal system works. The burden of proof rests with the accuser, not the accused. The appraiser is under no obligation to help you prove your case.

I will never know if it was cropped or framed because she refused to provide the original pictures, but according to the checklist she was required to take pictures to each property line, which she did not because it would have shown a deck and fence which she marked did not exist.

 

[Mike Ault]

They may be "grandfathered" for conventional loans but on an FHA loan they do not qualify.

Unless you know more than what you told us, we don't know what the "separation distances" are for your neighbors, do we? All you told us was that the properties were less than 1 acre. That fact alone does not preclude FHA financing for your neighbor's well and septic systems.

 

[Surf Cat]

How is that relevant? Would it change your opinion on anything?

Not at all. I believe everyone's been forthcoming and honest about your situation. Especially given the fact that you came to an Appraiser's Forum, trying to throw an appraiser under the bus....

I commend you, usually people don't make it this far.... we usually get insults thrown at us by now and they quit.... because we answer questions to situations such as yours honestly and objectively keeping in mind the standards we're held to. Plus, we take into account the many appraisals we've done and observations we've made in giving you these answers.

Can you imagine how much this would have cost you if you went to justanswer.com?

Okayyyy?

So again..... are you the borrower or the attorney?