Sunday, January 9, 2011

Appraiser Law Blog Predictions 2011

From Dave Towne:

Peter Christensen, a representative of a major E&O insurance provider, has made 11 predictions concerning AMC’s, but which will potentially affect appraisers. You can find his blog article

He mentions some key concerns facing appraisers, and I have added my own perspective:

a- AMC’s may be sued by lenders if it can be shown that improper appraisals were provided on properties covered by required ‘repurchases’ as a result of being foreclosed. You can be certain that the AMC will come after the appraiser in those instances.

b- Some appraisers still in the business are changing E&O carriers, and not including ‘prior acts’ coverage for previous appraisals. Some appraisers are leaving the business and not carrying ‘tail’ insurance for prior appraisals. In both cases, appraisers can face severe financial hardship if the lender, AMC or state investigator decide to come after the appraiser – which probably will happen when the fir starts to fly. Quickly selling everything and moving to a country without diplomatic relations or an extradition treaty with the US might be a good option.

c- Some AMC’s have ‘hold harmless’ clauses in their appraiser vendor agreements which require the appraiser to defend the AMC’s conduct. If the AMC is sued by a lender, the AMC will probably try hard to shift some of the blame to appraisers based on the hold harmless clause. Be careful about what you sign if your desire is to work for more AMC’s.

(NOTE: in WA state’s AMC Registration law which will become effective on July 1, this wording is included as a prohibited action: (o) Requiring an appraiser to sign any indemnification agreement that would require the appraiser to defend and hold harmless the appraisal management company or any of its agents, employees, or independent contractors for any liability, damage, losses, or claims arising out of the services performed by the appraisal management company or its agents, employees, or independent contractors and not the services performed by the appraiser.)

d- Deficient appraisal reports where a ‘reasonable basis to believe a USPAP violation has occurred’ must be reported to state regulators. Appraisers are encouraged to pay closer attention to USPAP reporting requirements. While Lenders are ultimately responsible for appraisals they accept, if they use an AMC for appraisal ordering, you can bet the AMC will begin even more ‘anal exams’ of reports. Expect to see more QA/QC notices.

Take the few minutes to read Peter’s blog for more information.

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