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Hearing more about appraisers in the news and not enough
of it good? The North Bay Chapter of REAA hosted a loss prevention
program for appraisers presented by Liability Insurance Administrators
on January 19th in Petaluma. LIA's General Counsel, Peter
Christensen, highlighted several of the areas of concern for
residential appraisers and shared specifics for appraisers
to use in their businesses to reduce risk.
According to Mr. Christensen, many issues can be avoided by
performing a few simple precautionary actions:
1. Trust your instincts. He cited that an overwhelming number
of appraisers seeking advice and legal help start their explanations
with "I felt there was something wrong here…".
2. Disclose property issues in plain English, take photographs
and keep a strong workfile, it will be your defense kit.
3. In California, the statute of limitations starts with the
claimant's discovery of the defective appraisal and runs 2
years. Remember, the USPAP record keeping rule is only 5 years
after appraisal preparation.
4. The Federal Deposit Insurance Corporation is the receiver
for failed banks and the FDIC made the most claims against
appraisers in 2011. The bad news is the discovery rule is
extended to 3 years for the FDIC. It is suggested appraisers
retain workfiles up to 8 years given the vintage of claims
currently arising.
Claims can start in several ways but all require a response,
think first is advice given by Mr. Christensen. Assess the
situation and consider a range of resolutions. Respond to
the claim and report it to your carrier. Do not offer to "correct
an error" or make admissions prior to getting all the
facts and reporting the situation to your carrier.
What has caused the rise in claims against appraisers? Mr.
Christensen noted the decline in values and subsequent defaults
expose many errors in the mortgage process including appraisals.
Mortgage liability via loan put backs and mortgage backed
securities litigation are some of the reasons the level of
claims against appraisers is elevated. The heightened scrutiny
of lending paperwork has found defects in many portions of
the loan file including underwriting, borrower information,
title and credit.
The good news is that many claims can be avoided by a few
best practices of strong workfiles, disclosure and proof reading
reports prior to delivery.
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