|A MURDER OF CROWS|
On May 9, 2011 as Plaintiff, the FDIC as Receiver of Washington Mutual Bank filed a complaint against LSI Appraisal, LLC; Fidelity National Information Services, inc, Lender Processing Services Inc; Lender Processing Services LLC; LPS Property Tax Solutions Inc, f/k/a Fidelity National Tax Service, Inc; LSI Title Company; and LSI Title Agency in US District Court, Central California, Santa Ana, Case Number 8:11-cv-00706-JST-MLG. The FDIC brings this case in its capacity as Receiver of the failed bank, Washington Mutual Bank, claiming that WaMu suffered as a direct and proximate result of the gross neglicence of LSI Appraisal, LLC and its repeated breaches of contractual provisions designed to protect the bank. (Links to Complaint, Exhibit C, and 2nd Amended Complaint are at bottom of page.)
In July 2006 WaMu hired LSI to provide appraisal services for residential properties in all fifty states and the District of Columbia. LSI represented and warranted that each and every appraisal service it provided would conform too federal and state law, regulatory guidelines, and all applicable industry standards. LSI agreed to serve as the "gatekeeper" with respect to the appraisal services it provided for WaMu. Further LSI agreed to insure the competency and qualifications of its appraisers to conduct a meaningful quality control review of the appraisals and to police WaMu's loan staff and act as an intermediary between WaMu's loan originators and LSI's appraisers. LSI promised to inform WaMu of any inappropriate contacts or requests by WaMu employees concerning an appraisal or the assignment of an appraisal. (See exhibit A, page 29 of the Complaint).
LSI provided appraisal services from July 2006 through November 2007. During this period LSI provided or approved more than 386,000 appraisals for residential loans that WaMu originated or purchased. WaMu quickly became LSI's largest client. WaMu paid LSI over $127 million for its services.
EXHIBIT C of the Complaint identifies at least 220 loans made by WaMu in reliance on LSI's appraisal services. Each loan was held by WaMu for investment and allegedly not sold into the secondary market. These loans are identified by Loan Number, Original Amount, Loss Amount, Loan Date, Property Address, City, State and Appraiser. See Exhibit C link below which sets forth basic information and sets forth the damages to WaMu with respect to each loan. The damages total $154,519,071. Exhibit D of the Complaint contains the key to a code number explaining the primary deficiencies in each of the 220 appraisals.
FDIC contends that LSI did not for the most part conduct any meaningful, substantive review of the 220 appraisals provided to WaMu. As of 5/0/2011 the FDIC had reviewed in depth only 292 of the thousands of appraisals for WaMu. Based on FDIC analysis, less than 4% of the appraisals were found to be fully compliant with applicable professional standards. 75% of appraisals reviewed were found to contain multiple egregious violations of USPAP and applicable industry standards. WaMu relied on these appraisal services when making residential loans to its borrowers.WaMu would not have made these residential loans but for the inflated appraisals provided or approved by LSI.
One example cited is Loan No. 3017902135 on Exhibit C. In May 2007 LSI appraised a property in Agoura Hills California for $5,540,000 that resulted in a $4,155,000 loan. The appraiser failed to adequately analyze the subject property contract or listing history as called for by the Fannie Mae Uniform Residential Appraisal Report form. The subject property's original listing price was $4,795,000 which was increased to $5,200,000 on January 22, 2007, then again to $5,540,000 (the contract price) On January 24, 2007. By failing to adequately analyze the subject contract and listing history, the appraiser failed to disclose that the contract price was actually $340,000, or 6.5%, higher than the already increased listing price, despite having been on the market for 485 days. The appraiser disclosed the prior site-only sale for $1,295,000, although he failed to explain how, 18 months later, he valued the site at $3,000,000. The appraiser provided inappropriate comparables. In the end the borrower defaulted on the loan, and WaMu charged of $1,391,500.15.
VIEW DOCUMENTS OBTAINED THROUGH PUBLIC RECORDS:
FDIC as RECEIVER of WASHINGTON MUTUAL BANK v LSI APPRAISALS, LENDER PROCESSING SERVICES INC, LPS PROPERTY TAX SOLUTIONS -- COMPLAINT WITH EXHIBITS Filed 5/9/2011 US District Court, Central California, Santa Ana 8:11-cv-00706-JST-MLG - Case 8:11-cv-00706-JST-MLG
FDIC as Reciever of Washington Mutual Bank v LSI Appraisals LLC and LPS Property Tax Solutions Inc -- Second Amended-Complaint -- Case 8:11-cv-00706-JST-MLG