While the bulk of this decision relates to class-action certification issues and is outside the scope of this blog, the underlying basis for this lawsuit relates to the disclosures by Quicken Loans to its appraisers of estimates of home values, including from the borrowers, both prior to the appraisal and after an appraisal was made with a value insufficient for the loan. As the Court of Appeals, relying on the Uniform Standards of Professional Appraisal Practice (USPAP) and directives from the Office of the Comptroller of the Currency, stated that "what started out as a common (though questionable) practice became one that, in short order, was explicitly forbidden- and viewed as unethical...."
These sort of disclosures come into play in bankruptcy, where valuation is frequently an issue, with the parties, whether the debtor, trustee or secured creditor seeking professional appraisals to support their positions regarding the value of assets. As providing estimates is "explicitly forbidden- and viewed as unethical" parties should not only refrain from providing those estimates, which would include details in the bankruptcy petition, but also, since appraisers are sophisticated professionals, amounts owed on liens, etc., as those could point the appraiser in the desired direction. Appraisers should be questioned about what information was provided in advance, since that can not only indicate a predetermined bias, but undermine the ethics and competence of the appraiser.
For a copy of the opinion, please click here: