FDIC files appraisal-based complaints against LPS, CoreLogic

5/13/2011)

On May 9, the Federal Deposit Insurance Corp. (FDIC) filed complaints against CoreLogic and Lender Processing Services (LPS) for losses totaling up to more than $283 million based on CoreLogic’s affiliation with eAppraiseIT and in LPS' case, its subsidiary LSI Appraisal LLC, an appraisal management company. In its complaint, the FDIC cites 220 appraisals performed between June 2006 and May 2008 as the cause of the damages claimed against LPS for a total of more than $154 million in losses. The FDIC complaint against CoreLogic alleges that eAppraiseIT was grossly negligent and breached its contract with the FDIC-received Washington Mutual Bank (WaMu) in the provision of appraisal services in 2006 and 2007 relating to 194 residential mortgage loans, resulting in at least $129 million in alleged losses. In its filing, LPS defended itself, saying that “for more than 75 percent of the appraisals identified by the FDIC, LSI was contracted only to provide reviews of appraisals, not to conduct the initial, full appraisals.” For all appraisals subject to this complaint, LPS believes there is no basis for a claim that LSI engaged in gross negligence or breach of contract related to these appraisal services, the filing states. CoreLogic has started to review 194 files selected by the FDIC from the more than 265,000 appraisals and reviews performed by eAppraiseIT for WaMu. “Based on the analysis to date, [CoreLogic] believes that for more than 85 percent of the loans cited in the FDIC lawsuit on which eAppraiseIT provided services to WaMu, eAppraiseIT’s services consisted of reviews of pre-existing, third-party appraisals provided to it by WaMu, with the vast majority being desk reviews,” states the company’s filing. The report also states that under eAppraiseIT’s agreement with WaMu, a desk review does not require any interior or exterior inspection by the reviewer. Rather, the agreement and applicable professional standards recognize that desk reviews are more limited in scope than full appraisals.