Verdict on Lehman Bros vs. Passarelli & Potts

[Ken B]

HA! Maybe my choice of adjectives was lacking!

But, seriously....that concept defies logic.

Can I apply that concept to the stock market? I bought some hi-tech stocks that flamed-out before I could sell them.....can I now sue the broker that sold them to me?

Yes.

http://www.fmew.com/archive/lies/

 

[PropertyEconomics]

The court did not say that. In fact, if one reads the information provided in the other thread, the court was very careful NOT to say that and to take time into consideration. Market change was not part of the defense. The defense tried to hang its hat on Intended User.

Read the court decision again Kenneth ... they used a valuation date over a year later ... I would suggest to you they did in fact penalize the original appraiser over the time differences. Original appraisals at sale Late 2003 / Early 2004 .. second valuation date of comparison Feb. 2005.
It is very difficult to understand the reasoning for the comparison. I dont think the court was quite as careful as you present here, again removing all personalities from the case, and just letting the document speak for itself. It is a real quandry.

 

[Ken B]

Read the court decision again Kenneth ... they used a valuation date over a year later ... I would suggest to you they did in fact penalize the original appraiser over the time differences. Original appraisals at sale Late 2003 / Early 2004 .. second valuation date of comparison Feb. 2005.
It is very difficult to understand the reasoning for the comparison. I dont think the court was quite as careful as you present here, again removing all personalities from the case, and just letting the document speak for itself. It is a real quandry.

"Based on this evidence, the Court concludes that a reasonable value for set-off is $260,000.00 per property, which is the value offered by Plaintiff’s expert as of February 9, 2005. The Court adopts this value because it corresponds to the point in time closest to when the borrowers had begun to default on the loans and when Plaintiff could have commenced mitigating its damages..."

Per the court docs, most closings on the subject properties occurred in 2003 and 2004. Properties were valued in February 2005 for the reason stated above.

So, when did the market, in general, start to decline? It depends on who you ask, but the earliest I have heard (and observed) was late summer of 2005. In this area, the general market was appreciating around 24% annually during the time period in question. And these properties previously sold for around $740K?

 

[PropertyEconomics]

"Based on this evidence, the Court concludes that a reasonable value for set-off is $260,000.00 per property, which is the value offered by Plaintiff’s expert as of February 9, 2005. The Court adopts this value because it corresponds to the point in time closest to when the borrowers had begun to default on the loans and when Plaintiff could have commenced mitigating its damages..."

Per the court docs, most closings on the subject properties occurred in 2003 and 2004. Properties were valued in February 2005 for the reason stated above.

So, when did the market, in general, start to decline? It depends on who you ask, but the earliest I have heard (and observed) was late summer of 2005. In this area, the general market was appreciating around 24% annually during the time period in question. And these properties previously sold for around $740K?

As I stated setting all personalities aside .. the appraiser was held liable for the value difference between the effective date of appraisal and Feb 2005 .. I honstly dont care what it corresponds with. I believe the court to be in factual error here. What if the the beginning of default had not been until Jan. 2008 .. using the courts reasoning the appraiser would still have been responsible. I believe this is a major flaw in the court ruling and places an appraiser in a position of liability they should not have to or be required to assume.

 

[Ken B]

As I stated setting all personalities aside .. the appraiser was held liable for the value difference between the effective date of appraisal and Feb 2005 .. I honstly dont care what it corresponds with. I believe the court to be in factual error here. What if the the beginning of default had not been until Jan. 2008 .. using the courts reasoning the appraiser would still have been responsible. I believe this is a major flaw in the court ruling and places an appraiser in a position of liability they should not have to or be required to assume.

In an appreciating market, should the court have awarded damages based upon market values effective the date loans started to go bad or upon the, potentially, lower market values effective the date of funding?

By establishing damages effective the earlier date, when market values were, say, 24% lower, wouldn't that give the plaintiff an unearned reward?

Perhaps there is a reason the defense did not argue the effective date of the expert witness' appraisals.

 

[PropertyEconomics]

In an appreciating market, should the court have awarded damages based upon market values effective the date loans started to go bad or upon the, potentially, lower market values effective the date of funding?

By establishing damages effective the earlier date, when market values were, say, 24% lower, wouldn't that give the plaintiff an unearned reward?

Perhaps there is a reason the defense did not argue the effective date of the expert witness' appraisals.

The suit was against the appraiser Ken ... do you not see a disconnect in the date of the original appraised values and the fact the appraiser is held to a value 1 year later? Why should an appraiser be held liable for 1) the actions of the borrwer and 2) the actions of the lender?
The appraiser only provided value indications .. they did not approve the loan nor did they measure the credit worthiness of the borrwer.
My point is the appraiser was held liable for value declines for over a year after the effective date of the report.

 

[Fred]

The suit was against the appraiser Ken ... do you not see a disconnect in the date of the original appraised values and the fact the appraiser is held to a value 1 year later? Why should an appraiser be held liable for 1) the actions of the borrwer and 2) the actions of the lender?

There is a disconnect and a connect. It's not that you are wrong, but you are "allocating" like an appraiser. Once there is an adjudication of wrongdoing, everything subsequent to act might be piled on as an effect of the cause. Example, you do an appraisal, client loses $10,000, client gets depressed and commits suicide, clien't family sues you for the present value of 30 years lost future income.

 

[Carnivore]

Ken and PE,

Thats the part the seems to be the mystery to solve. Only Joyce can explain it. Something is not right here.

What were they doing, just trying to get a dismissal on lack of standing?

There was no damages awarded, go figure

 

[PropertyEconomics]

There is a disconnect and a connect. It's not that you are wrong, but you are "allocating" like an appraiser. Once there is an adjudication of wrongdoing, everything subsequent to act might be piled on as an effect of the cause. Example, you do an appraisal, client loses $10,000, client gets depressed and commits suicide, clien't family sues you for the present value of 30 years lost future income.

Steven I read your post .. but the appraiser cannot be held liable for a declining market, or can they? It seems the case would have been much stronger if they had shown the appraiser was wrong in the first place ... as of the date of valuation. I know piling on is the basis for nearly all law suits but it still begs the legal question as to the liability of the appraiser and exactly how far the liablity extends.
I am an appraiser and thus thats how I allocate and in fact the court allocated as well with respect to damages among the parties involved ... but I have always been led to believe my valuation is as of a specific date and in this instance no one committed suicide. I remain curious as to why the appraiser was held to the valuation of a property that is one year after the date of the report. Had there been a hurricane and the property owner not had insurance, would the appraiser be held liable for that loss in value as well?

Carnivore .. actually there were damages awarded ... they were offset by settlements of others who had completely covered the actual loss. Even though the damage award was ZERO .. there still remains the fact that the appraiser was found liable for damages. Had others not settled ... the appraiser would have realized a judgement of an amount greater than zero.

 

[Ken B]

My point is the appraiser was held liable for value declines for over a year after the effective date of the report.

The properties in question originally sold in the range of $740K. A year later, more or less, they are valued at $260K. During a period when the market, in general, was appreciating at a rate in the range of 24% annually, these particular properties "lost" 65% of their value. I don't know what that tells you, but it apparently told the jury something pretty important.