Struggling mortgage service provider CoreLogic is closing down its appraisal management company. The business, which now faces more regulatory scrutiny, is in ongoing litigation over appraisals performed for Washington Mutual Bank.
The Santa Ana, Calif.-based company reported a $67 million loss during 2011, about the same as its 2010 loss.
CoreLogic, which was divested from The First American Corp. in June 2010, said last August that its board was exploring several options to enhance shareholder value including cost-cutting initiatives, a capital structure evaluation and the possible repurchase of debt and common stock.
“The potential disposition of business lines” and “the potential sale or business combination of the company” was also among the alternatives.
In a FORM 10-Q filing on April 30 with the Securities and Exchange Commission, CoreLogic noted that its prior interim financial statements had been recast to show several businesses — including its AMC — as “discontinued operations.”
“As of March 31, 2012, we determined to wind down our wholly-owned appraisal management company business in lieu of a sale which resulted in a pre-tax write-down of the remaining goodwill of $13.9 million in the first quarter of 2012,” the filing stated.
The SEC filing went on to explain that its AMC is among several business that face expanded regulations a result of the Dodd-Frank act, and CoreLogic’s inability to adapt could cause additional losses.
The AMC previously operated as eAppraiseIT.
On Monday, a memo was provided to approved appraisers indicating that a decision had been made to exit the AMC business.
“All business operations of CoreLogic Valuation Services will be discontinued on or before Sept. 30, 2012,” the memo stated.
None of the company’s joint venture appraisal businesses are impacted by the decision.
CoreLogic said that there will be no immediate impact on its appraiser panel, and it will continue to accept appraisal orders from clients and complete outstanding orders during the short term.
“At this time, there are no changes to the way in which panel members receive, complete, or submit appraisal orders,” CoreLogic said.
One appraiser said that the company plans to introduce a new valuation product that will be offered by a new appraisal division.
CoreLogic disclosed in the recent 10-Q filing that a second amended complaint was filed on Feb. 16 by the Federal Deposit Insurance Corp. in a lawsuit that was originally filed in May 2011 on behalf of Washington Mutual Bank against CoreLogic Valuation Service. The FDIC seeks $129 million for losses on 194 residential loans. The judge, which had dismissed four of the FDIC’s six claims in November, dismissed a $16 million breach of contract claim on April 25.
“The company intends to defend against the remaining claims vigorously; however, we may not be successful,” CoreLogic stated. “At this time, we cannot predict the ultimate outcome of this claim or the potential range of damages, if any.”
In another lawsuit tied to WaMu appraisals originally filed in November 2007 by New York’s attorney general, the denial by the trial court of a motion to dismiss was affirmed on Nov. 22, 2011, by the Court of Appeals of New York. The U.S. Supreme Court declined to review the decision on April 16, and the case has been set to start the trial June 11.
