Judge Rules Appraiser/Lender Owe no duty of care

[Mike Ault]

I have seen numerous cases where FHA has insured a newer home, only to have the foundation fail in short order. The only recourse for the borrower, much like your case, is to walk away. FHA has sold those homes, someone has purchased them for a song, put lipstick on a pig, and resold them with, you can guess, a mortgage insured by FHA. Again, you can guess, the new buyer shortly thereafter finds the foundation has continued to shift and fail, followed by a default, followed by an FHA foreclosure and resale. I mentioned that scenario to an FHA employee a few years back, and suggested that they should have a database of such properties classified as unsuitable for their program. They were astounded at the possibility and indicated they would pass that along to their superiors. I'm sure a check in a few decades will find that nothing has changed. Spending other people's money without accountability is easy and painless.

They used to maintain a database of uninsurable properties. When we ran into costs exceeding $5,000 to meet MPRs, we were still to complete the appraisal and submit it so that address could be flagged as uninsurable. Another process that went by the wayside with the lender select system.

 

[Huds_Harm]

They used to maintain a database of uninsurable properties. When we ran into costs exceeding $5,000 to meet MPRs, we were still to complete the appraisal and submit it so that address could be flagged as uninsurable. Another process that went by the wayside with the lender select system.

Interesting number. Same used for determining a 518b claim.

Section 518(b) of the National Housing Act, as amended, * authorizes the Secretary of HUD to correct, or to reimburse owners for the correction of structural or other major defects in some homes if the mortgages were insured by HUD under Section 235 of the National Housing Act.

(d) The defect must have existed at time of the original appraisal and be one which a proper inspection by the HUD appraiser would have normally revealed.

HEADQUARTERS REVIEW. Any claim or combination of claims determined to be eligible for assistance in an estimated amount of $5,000 or more must be submitted to the Director, Single Family Development Division, Washington, D.C., for review and approval prior to notification to claimant of eligibility of the claim. The complete file must be submitted with a request for approval together with any explanatory information necessary to clearly establish the basis for approval of the claim.

 

[George Hatch]

Have you read through the document from which that quote was extracted? If not then you should.

 

[Mike Ault]

Section 518(b) of the National Housing Act (NHA) covers certain FHA Section 203 and 221 homes purchased between 1968 and 1973. Personally, I don't think it's a bad concept. Cuomo threw appraisers under the bus when his department conflated "FHA appraisal inspections" with "home inspections". At the time, one of the movers and shakers at HUD told appraisers "be happy that we're still using you, there was serious consideration given to replacing appraisals & appraisers with AVMs and home inspections." If FHA is going to issue a mortgage insurance certificate for a loan, and collect their fee, that means they're insuring the lenders underwriting thereof, in my humble, non-legal opinion.

 

[Huds_Harm]

Section 518(b) of the National Housing Act (NHA) covers certain FHA Section 203 and 221 homes purchased between 1968 and 1973.

I am aware of that. And HUD's job post from 2023 states

“Provide technical support on consumer complaints on building construction and deals with the 518a and 518b repair program requirements.”

So either they are still processing claims from 40 years ago or its still available.

 

[Huds_Harm]

Section 518(b) of the National Housing Act (NHA) covers certain FHA Section 203 and 221 homes purchased between 1968 and 1973. Personally, I don't think it's a bad concept. Cuomo threw appraisers under the bus when his department conflated "FHA appraisal inspections" with "home inspections". At the time, one of the movers and shakers at HUD told appraisers "be happy that we're still using you, there was serious consideration given to replacing appraisals & appraisers with AVMs and home inspections." If FHA is going to issue a mortgage insurance certificate for a loan, and collect their fee, that means they're insuring the lenders underwriting thereof, in my humble, non-legal opinion.

Look at that we finally agree.

And HUD's job post from 2023 states

“Provide technical support on consumer complaints on building construction and deals with the 518a and 518b repair program requirements.”

So either they are still processing claims from 50 years ago, its still available, or should be available.

 

[Mike Ault]

Look at that we finally agree.

Not only do we agree, I would love to see you pursue that angle and report back to us!

 

[George Hatch]

The position of the tank was a structural or safety hazard, but whatevs.

 

[Mike Ault]

The position of the tank was a structural or safety hazard, but whatevs.

It would seem to fall under the category of "other major defects". As I recall from last year's thread, the OP was relying upon the lenders underwriting of the loan to ensure her interests were protected. I'm just quoting from memory here, however, it seems like there was no bacteriological tests ordered on the well by anyone prior to closing because the lender was under the impression that the well did not exist. Therefore, the OP closed on the loan, noticed some evidence of sewage in her well water (can't remember it was smell or if a family member got sick) and only when that was confirmed, did the true scope of the disaster became apparent. In my opinion, a cascading series of negligence throughout her loan process led to the dilemma she found herself in. It would be great to see her made whole again, and I'm rooting for it.

 

[jay trotta]

Interesting number. Same used for determining a 518b claim.

Section 518(b) of the National Housing Act, as amended, * authorizes the Secretary of HUD to correct, or to reimburse owners for the correction of structural or other major defects in some homes if the mortgages were insured by HUD under Section 235 of the National Housing Act.

(d) The defect must have existed at time of the original appraisal and be one which a proper inspection by the HUD appraiser would have normally revealed.

HEADQUARTERS REVIEW. Any claim or combination of claims determined to be eligible for assistance in an estimated amount of $5,000 or more must be submitted to the Director, Single Family Development Division, Washington, D.C., for review and approval prior to notification to claimant of eligibility of the claim. The complete file must be submitted with a request for approval together with any explanatory information necessary to clearly establish the basis for approval of the claim.

"reimburse owners for the correction of structural or other major defects in some homes"
In previous posts we have established "no septic/well inspection was completed" per you.
I would find it hard to believe that without a "Qualified Expert" in their License Field (Septic/Structural/Etc) within State Regulatory compliance, an appraiser, would not fall under that License Law.

together with any explanatory information necessary to clearly establish the basis for approval of the claim
A Judge has already denied the Claim, which would appear to support non clarity in the claim

Again, as of the Effective Date, all parties appeared to have completed their required business and the Loan Closed. Who knows what provoked the system failure. Anyone could have left the water running for days, weeks for all we know.

So, are you now saying you reviewed Section 235 (HUD) of the National Housing Act, prior to Closing the Loan??
(d) The defect must have existed at time of the original appraisal and be one which a proper inspection by the HUD appraiser would have normally revealed.
IMO-you have been provided with information within the thread regarding this, also, where is the Sales Agreement which stipulates you agreed to inspections or waived them?