Judge Rules Appraiser/Lender Owe no duty of care

[John Hassler]

I realized you said “different” and edited it. No going back now to re-edit.

Edit: you're quick on the trigger and responded to my post in one minute.

 

[George Hatch]

To which I am appreciative. This forum informed me of cert 23 which my attorney tried to use.

And I read a previous lawsuit post on here where appraisers were complaining about the borrower suing the appraiser only to which I thought it's good that I'm attempting to hold the lender accountable too.

This forum gave me proof of my lender "forcefully" telling appraisers they require "as is" only appraisals.

Which helped me a borrower that knew nothing about FHA minimum property requirements put the pieces to the puzzle that led to HUD updating their defect taxonomy.

So regardless if I get resolution I know the next person that has a borrower complaint, HUD will not be allowed to tell the lender "there is no way they could have known."

C#23 doesn't make any 3rd party an intended user as that term is defined in our standards.

The form itself explicitly does address the issue about the intended use and the intended users as identified by the appraisers. You aren't a lender, and you don't make underwriting decisions for mortgage financing transactions. The glove don't fit so you must quit.



Now you *might* choose to use it as an off-label user for an off-label use but that doesn't mean the appraiser ever intended for you to use it, nor does it mean your usage is consistent with the intended use stated on the form. Your needs haven't been communicated to the appraiser nor would they have any way to identify what your particular needs are or what you consider to be meaningful to your decision making. These are all elements of the appraisers scope of work and reporting decisions, which they cannot make on an informed basis without knowing who is using, how they are using it and what it takes for the appraiser to meet the benchmarks of "meaningful to intended users".

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Aside from that, you have a couple of our members who hate everything about the appraisal business as it exists today telling you the lender has a bad reputation, which that's fine as far as that goes. But that reputation isn't proof that this appraiser was directly told by this lender to dork this assignment. Not even those critics can dispute that little inconvenient truth. You should get some evidence like an email or written policies or instructions - in writing - about this assignment before you start casually using the word "proof".

If you want to run a PR campaign to force the politicians to act then that might be the most effective way to spread the word. I don't that's going to help you extract $100k out of FHA, but perhaps I'm wrong about that.

 

[Fernando]

This thread is a warning to all.
Real Estate Agents must do their fiduciary duties in protecting the buyer in the minefield of real estate purchase.
Clients/Lenders must do better job in choosing appraisers and reviewing the reports. Lender has deep pockets to fight the case.
Appraisers must realize that Intended User as indicated by USPAP has its limits when buyer and lawyer can always sue. Appraiser has no choice but to fight the case to save career.
Appraisers have to rethink if it's worth the high risk for low fees and fast turnaround.
Only winners in this case are the attorneys who got paid if not contingency.

 

[Raven59]

I believe a mistake was made, and I'm not here to make excuses for the appraiser. I understand your position on FHA's policy. It's impossible to create a one-size-fits-all rule, and FHA recognizes this by implementing very strict guidelines for variances.

As you've described, the local standards for wells and septic locations, approved by a local authority, play a crucial role in FHA's policy. These standards provide a solution in cases where the well and septic system are less than 50 feet apart (or 100 feet for the leach field), but local regulations permit this. This flexibility ensures that local conditions are considered while maintaining the required safety standards, and it's essential for obtaining and including proper documentation in the loan file. The lender and underwriter must ensure that the local standards are met and that the property does not pose health or safety risks. Based on your comment, this property would fit the exception to the rule.

There are standards of care expectations determined by the client, market, and industry standards (USPAP). Unfortunately, there will always be bad apples. We have processes within the industry to deal with these issues, but the cry for lower standards and barriers to entry has created more bad than good. It is what it is. Even with good appraisers, their actions can unintentionally harm the end user. This is present in any industry. That's why I have E&O insurance and procedures in place to ensure those mistakes are significantly minimized. Risk reduction is crucial. I am human and can make mistakes, and I will accept responsibility for my actions. However, I will not accept that my mistakes were intentional. I believe you said the appraiser admitted to her mistake. How her insurance carrier defends that position is generally not the appraiser's choice.

 

[Zoe]

C#23 doesn't make any 3rd party an intended user as that term is defined in our standards.

The form itself explicitly does address the issue about the intended use and the intended users as identified by the appraisers. You aren't a lender, and you don't make underwriting decisions for mortgage financing transactions. The glove don't fit so you must quit.

View attachment 89170

Now you *might* choose to use it as an off-label user for an off-label use but that doesn't mean the appraiser ever intended for you to use it, nor does it mean your usage is consistent with the intended use stated on the form. Your needs haven't been communicated to the appraiser nor would they have any way to identify what your particular needs are or what you consider to be meaningful to your decision making. These are all elements of the appraisers scope of work and reporting decisions, which they cannot make on an informed basis without knowing who is using, how they are using it and what it takes for the appraiser to meet the benchmarks of "meaningful to intended users".

-----------------
Aside from that, you have a couple of our members who hate everything about the appraisal business as it exists today telling you the lender has a bad reputation, which that's fine as far as that goes. But that reputation isn't proof that this appraiser was directly told by this lender to dork this assignment. Not even those critics can dispute that little inconvenient truth. You should get some evidence like an email or written policies or instructions - in writing - about this assignment before you start casually using the word "proof".

If you want to run a PR campaign to force the politicians to act then that might be the most effective way to spread the word. I don't that's going to help you extract $100k out of FHA, but perhaps I'm wrong about that.

Better be glad VA or CFPB are not in it. Not good hound dog. Her lawyer should be contacting CFPB directly.

I wonder if code enforcement even exists where her house is?

 

[Huds_Harm]

I believe a mistake was made, and I'm not here to make excuses for the appraiser. I understand your position on FHA's policy. It's impossible to create a one-size-fits-all rule, and FHA recognizes this by implementing very strict guidelines for variances.

As you've described, the local standards for wells and septic locations, approved by a local authority, play a crucial role in FHA's policy. These standards provide a solution in cases where the well and septic system are less than 50 feet apart (or 100 feet for the leach field), but local regulations permit this. This flexibility ensures that local conditions are considered while maintaining the required safety standards, and it's essential for obtaining and including proper documentation in the loan file. The lender and underwriter must ensure that the local standards are met and that the property does not pose health or safety risks. Based on your comment, this property would fit the exception to the rule.

There are standards of care expectations determined by the client, market, and industry standards (USPAP). Unfortunately, there will always be bad apples. We have processes within the industry to deal with these issues, but the cry for lower standards and barriers to entry has created more bad than good. It is what it is. Even with good appraisers, their actions can unintentionally harm the end user. This is present in any industry. That's why I have E&O insurance and procedures in place to ensure those mistakes are significantly minimized. Risk reduction is crucial. I am human and can make mistakes, and I will accept responsibility for my actions. However, I will not accept that my mistakes were intentional. I believe you said the appraiser admitted to her mistake. How her insurance carrier defends that position is generally not the appraiser's choice.

FHA will not accept anything less than 75ft between well and septic. This property even with repair cannot qualify.
How is it that the appraiser has admitted to the error and omission, but her e and o insurance are not obligated to fix it?

 

[shrubberyvaluation]

FHA will not accept anything less than 75ft between well and septic. This property even with repair cannot qualify.
How is it that the appraiser has admitted to the error and omission, but her e and o insurance are not obligated to fix it?

Because the lender and/or HUD have not gone after the appraiser?

 

[Huds_Harm]

Better be glad VA or CFPB are not in it. Not good hound dog. Her lawyer should be contacting CFPB directly.

I wonder if code enforcement even exists where her house is?

She recently received the following from FHA commissioner Julia Gordon after telling her of the situation:

“According to my team, they have looked into your situation multiple times and have determined that there is nothing HUD can do. They have advised you to file a complaint with your state regulators. While I have asked them to go back to look again, I do not have any reason to believe the answer will be different, and unfortunately another inquiry will likely take at least several weeks at best and possibly longer.”
Have you filed a complaint with state regulators, the CFPB, the Appraisal Foundation, or anyone else besides HUD?
Sincerely yours,
Julia Gordon
Julia R. Gordon
Assistant Secretary for Housing and Federal Housing Commissioner
U.S. Department of Housing and Urban Development”
To which she simply replied “the Lender used your fraudulent response stating “there was no way they could have known of the error” to close my CFPB complaint over two years ago and the Appraisal licensing board cannot collect on my behalf nor make me whole.”

 

[Huds_Harm]

Because the lender and/or HUD have not gone after the appraiser?

She learned that HUD not only relies on the lender to “self-report” loan defects, they get to choose the defect category out of the 9, some of which having lesser penalties than others.

The lender chose the category of property eligibility rather than property appraisal because the category of property appraisal incriminates “appraiser and/or underwriter” and is a severity level of 2 requiring Mitigating Documentation OR Indemnification – Life-of-Loan and states

FHA is unable to determine appraiser and/or underwriter compliance with applicable policies for the appraisal, collateral valuation, or property acceptability due to absence of valid documentation.

FHA is able to conclude that the property was not appraised and/or underwritten in compliance with applicable policies and the appraised value is not supported or the property is not acceptable as a result.

Documentation required for specific property types, programs/products, or by construction status was not obtained to support FHA max insurable loan amount.

FHA closed the review stating to the lender. “Thank you for the self-report regarding the properties well and septic. FHA has taken the appropriate actions and has determined that lender could not have known about the well and septic prior to closing. No further action is required.”

The lender used this to close my CFPB complaint.

HUD updated their policy last week due to this situation making fraud and misrepresentation an automatic lender should have known category.

 

[Huds_Harm]

C#23 doesn't make any 3rd party an intended user as that term is defined in our standards.

The form itself explicitly does address the issue about the intended use and the intended users as identified by the appraisers. You aren't a lender, and you don't make underwriting decisions for mortgage financing transactions. The glove don't fit so you must quit.

View attachment 89170

Now you *might* choose to use it as an off-label user for an off-label use but that doesn't mean the appraiser ever intended for you to use it, nor does it mean your usage is consistent with the intended use stated on the form. Your needs haven't been communicated to the appraiser nor would they have any way to identify what your particular needs are or what you consider to be meaningful to your decision making. These are all elements of the appraisers scope of work and reporting decisions, which they cannot make on an informed basis without knowing who is using, how they are using it and what it takes for the appraiser to meet the benchmarks of "meaningful to intended users".

-----------------
Aside from that, you have a couple of our members who hate everything about the appraisal business as it exists today telling you the lender has a bad reputation, which that's fine as far as that goes. But that reputation isn't proof that this appraiser was directly told by this lender to dork this assignment. Not even those critics can dispute that little inconvenient truth. You should get some evidence like an email or written policies or instructions - in writing - about this assignment before you start casually using the word "proof".

If you want to run a PR campaign to force the politicians to act then that might be the most effective way to spread the word. I don't that's going to help you extract $100k out of FHA, but perhaps I'm wrong about that.

Which brings me back to

With regard to products liability, a defendant is liable when the plaintiff proves that the product is defective, regardless of the defendant’s intent. It is irrelevant whether the manufacturer or supplier exercised great care; if there is a defect in the product that causes harm, he or she will be liable for it.

This is the only industry where a consumer pays for a product, in this case $650.00, and if that item is defective and or causes harm, the appraiser is allowed to CYA out of it.