Judge Rules Appraiser/Lender Owe no duty of care

[Dublin ohio]

You might be right about that. I associate everything I never liked about HUD with Cuomo. On second thought, I just checked, and found this…

The Homebuyer Summary and Valuation Condition (VC) Sheet was required for mandatory use in FHA appraisals on September 10, 1999, as announced in Mortgagee Letter 99-22. The VC sheet was for FHA use only and required that any issues that didn't meet expectations be corrected or repaired before closing. However, HUD retired the VC sheets in January 2006, when they also made Fannie Mae report forms mandatory. After that, any valuation condition concerns, such as repairs, inspections, and alterations, had to be reported in the relevant section of the Fannie Mae form.

And this…

Secretary Andrew Cuomo - HUD Archives

HUD Archives (.gov)
https://archives.HUD.gov › secretaries › cuomoindex

Secretary Andrew Cuomo was the 11th U.S. Secretary of Housing and Urban Development serving from Jan. 29, 1997 to Jan. 20, 2001.

Which leads me to to the conclusion that my initial finger pointing towards him, was correct.

Forgot about Cuomo being Sec. of HUD at that time. But to be honest, Ithought the VC sheet was a better approach, Spelled it right out. The current system depends too much on interpretation and individual judgement.

 

[Dublin ohio]

shouldn't buyers and agents be more aware of these septic tank issues and potential cost if failure.

You are making that assumption based on one incident. Our MLS has a field for public or private sewer or water. Very rare to see a mistake in the MLS. The property disclosure required also has an area for that. There is a potential for failure on just about everything. Most people don't know they have septic tank issues. Until they have septic tank issues.There are some basic steps you can take to prevent undue stress to the system. But that is about it.

 

[Huds_Harm]

Let's talk about what you did as a consumer, and what the terms and conditions were in that transaction.

What you actually paid for was a loan. The lender collected some of their costs from you and used some of those fund to offset some of their costs, including the appraisal and the title search and various other junk fees and such, but that doesn't alter the point that what you bought from the lender and FHA was a loan. Which you have received and which you are now enjoying the proceeds.

Sometimes the value of the property that the loan encumbers increases in value. Sometimes it decreases in value. Sometimes things break. The terms of the loans the lenders make don't include any assurances of the property attributes or any warranty of those attributes. The lenders arguably don't owe the borrowers anything as to those attributes. What they agreed to do was to provide and service their loan as per the terms and conditions of the loan, just as the borrowers also don't owe anything else to the lenders except to perform on their end.

You paid for a loan and you got a loan. They now own the mortgage position, which includes the risk for either getting all their money back or getting only part of their money back. You own the equity position which includes the potential for either profit or loss. All you bought was a loan, not a warranty that they will cover your losses in the event the property loses value or something breaks.

You and the appraiser didn't enter into any agreement with one another. You entered into an agreement with the lender as a consumer, and the appraiser entered into an agreement as a vendor, no different than if the lender had engaged or employed an attorney or an accountant or a environmental consultant or home inspector of whatnot. If/when engaged these other employees or contractors activities are aimed directly and solely at assisting the lender to evaluate the property insofar as their attempts to make a loan and subsequently profit by the repayment thereof. None of these due diligence services are made for the purpose or with the intent of protecting the borrower from the unknown, nor is the lender selling such protection to the borrower as part of their loan.

It appears these are among the reasons that the lender is telling you they are not responsible for the condition or the value of your property. You didn't purchase such assurances from them. They are performing on their end of the loan and they expect you to perform on your end of the loan.

The appraiser made errors but IRL the lender is only going to go after them if the loan defaults and the lender loses money. You did not engage the lender to protect you from any losses or to collect damages for you. If you sue the appraiser and win by alleging and proving that the appraiser owes you a new sewer and well then the appraiser's E&O probably comes into play. If you allege and prove the appraiser committed fraud then the appraiser may have to pay it all out of pocket. The judge has issued legal rulings as per their read of the laws as they are written - and to which you strongly disagree. You can appeal these rulings but at this point that's your primary barrier - the judge's read of the law as written.

And this is where I have a problem with you attempting to deflect to the borrower.

The loan I applied for was CONTINGENT upon the APPRAISAL determining the home met all FHA MPR requirements.

Nothing a borrower DOES OR DOES NOT do absolves an appraiser and lender of their duty.

The only entity that was REQUIRED to do something and did not was the APPRAISER.

 

[Fernando]

You are making that assumption based on one incident. Our MLS has a field for public or private sewer or water. Very rare to see a mistake in the MLS. The property disclosure required also has an area for that. There is a potential for failure on just about everything. Most people don't know they have septic tank issues. Until they have septic tank issues.There are some basic steps you can take to prevent undue stress to the system. But that is about it.

I don't know if other states like CA having disclosures. Sellers have to disclose what they know about their property. Thus having all the good and bad info, they can determine if they want to investigate the bad. It works so all buyers have same information and they decide the offer price.
FHA by increasing appraisers observation requirement years back gave buyers false sense that we're inspectors.

 

[Huds_Harm]

The point remains, there is zero overlap between

"This is what we require to make this loan"​

vs​

"This is what we owe you if we make a mistake on our end about your property attributes" ​

​

If the lender never made any assertions or assurances to the borrower as to the attributes of the property then that is what it is. If the reason you're not going after the broker is because they explicitly advised you to exercise your own due diligence then you're probably not going to get any further with a party that didn't sell you the property,

The lender does sign Part V. Mortgagee's Certification certifying the appraisal has been reviewed and the property meets all FHA MPR.

 

[Fernando]

The lender does sign Part V. Mortgagee's Certification certifying the appraisal has been reviewed and the property meets all FHA MPR.

Sounds like talking points lawyers would make.
When it comes down to it, borrower was not the intended user of the appraisal report. Issues with the report is between the appraiser and lender.

 

[Surf Cat]

I am not suing for a failed septic system.

So..... that explains the exorbitant cost which everyone here thinks is for the septic system when in reality, the $100k is for damages and negligence by (in your opinion) the appraiser.

There was not an official septic test since the location was unknown until weeks after my home inspection.

So there was not a home inspection test by a home inspector..... this had quite a few people scratching their heads here; "why not go after the home inspector?" which most likely would have indicated the required distances from the home and well. Because they didn't inspect it.
Also unsure if Home Inspection was done after the purchase.

I asked for the tanks to be pumped to make the seller locate it and naively thought if problems were revealed at that time of maintenance the seller would have been required to disclose.

Many municipalities are extremely strict in regards to septic systems. If a reputable company came out and pumped it, it would have to be reported to the local building department along with the septic's status of being up to code.

I believe you said you were in Texas? I post from my cell phone and cell phones don't give poster's locations for some reason. Maybe Mike Ault can chime in on that one.

I did have a septic company come fill the tank to ensure it was draining properly.

Again..... "if" the municipality has rules for recording and reporting the status of septic systems, this situation could have been cut off at the pass prior to the purchase. But I'm guessing that this service you had done above, was done "after" the purchase yes? And this is where you found out you needed a whole new septic system?

Since the aforementioned items we're done "after the fact", the only avenue is to go after the fumbling, bumbling, don't know how to fill out a report, AMC appraiser.

Is my hypothesis correct?

 

[Fernando]

And we still don't know how OP is vested in this case? Is OP the buyer's real estate agent?

 

[Surf Cat]

And we still don't know how OP is vested in this case? Is OP the buyer's real estate agent?

Lots of side steps.....

 

[Huds_Harm]

I respectfully disagree. I have been in multiple cases that conflict with your conclusion. My explanation was offered from direct involvement in similar scenarios. Scenarios that involved communication with HUD. My cases involved a well and septic within 15 feet of each other, the subject well within 5 feet of the subject property line and the septic on the neighbor property and within 25 feet of the well, six properties on the same water well, no water or sewer source within the property boundaries, and a water well in the crawl space. All conflict with HUD.

There are exceptions. I realize that is not what you want to hear although it will help you someday if the property is put up for sale.

Unless this was determined on those properties they were NOT eligible

Evidence that the ground surface is effectively separated by an impervious strata. This may be supported by a well driller’s log or acceptable substitute. Acceptable substitutes are a subsurface evaluation letter from either the local Water Management District or Health Department or a letter from a qualified well installer provided it clearly shows data which would otherwise have been revealed by the well driller’s log. The underwriter must insure the well driller's log (or acceptable substitute) denotes an apparent impervious strata. If this information is not available, the property is NOT eligible for HUD/FHA mortgage insurance.