Appraisers Vs. Wells

So Sound sued.

The lawsuit was filed in U.S. District Court for the Northern District of California on April 14 against Wells and Valuation Information Technology LLC, according to a copy of the complaint provided by the plaintiffs’ law firm Hagens Berman Sobol Shapiro.

No response has yet been filed in the case by Wells, and the San Francisco-based institution said in a statement to MortgageDaily.com that it “doesn’t comment on pending litigation.”

The defendants are accused of violating the federal Racketeering Influenced and Corrupt Practices Act.

As Wells saw exponential growth between 2000 and 2006, it gave incentives to employees who funded “as many loans as quickly as possible” that included lavish trips for top performers, the complaint alleges. But the growth was fueled by high-cost predatory lending.

“Part of Wells Fargo’s scheme to increase market share and to make as many loans as possible has involved the corruption of the appraisal process,” the complaint says. “Wells Fargo needs appraisals that support the loans it wishes to make, irrespective of the actual values of the properties being appraised.”

Wells reportedly began utilizing Valuation — which previously operated as ValueIT and now does business as Rels Valuation — in 2004, the complaint says. The company is a joint venture between a Wells subsidiary and First American Real Estate Solutions.

Minnetonka, Minn.-based Rels, which the lawsuit referred to as a “captive puppet of Wells,” allegedly fed a predetermined figure to appraisers with the expectation that the final value would come in above the “borrower estimated value” supplied by Rels.

The HVCC, which became effective on May 1, prohibits providing appraisers with a target value. While the lawsuit didn’t mention the new code, it did cite requirements under the Uniform Standards of Professional Appraisal Practice, or USPAP; the Office of Thrift Supervision’s Frequently Asked Questions on the Appraisal Regulations; and the Interagency Statement on Independent Appraisal and Evaluation Functions.

“Wells Fargo and its appraisal management service, Rels Valuation, pressure and intimidate appraisers to deliver inflated home appraisal values,” an announcement from Hagens Berman said. “If appraisers refuse to inflate prices and change their reports, they end up blacklisted and denied future work with the companies.”

By being blacklisted, the plaintiffs claim they also stop seeing business from mortgage brokers who are wary of losing available program options by ordering from a blacklisted appraiser — though the HVCC prohibits appraisal orders made by brokers. Wells’ massive size alone results in substantial revenue loss for the appraisers.

Also listed as a plaintiff is Vail, Colo., Savage Appraisal, which allegedly had been handling work for Rels for more than 12 years before it was blacklisted after resisting pressure from Rels to increase the fair market value on two appraisals.

Statements from nine other appraisers that supported the plaintiffs’ case were cited in the complaint.

Attorneys hope to include in the lawsuit all state-licensed or state-approved appraisers in the country who have lost approval with Wells or Rels. Treble damages are sought.

Sound Appraisal and Savage Appraisal Services Inc., on behalf of themselves and all others similarly situated, Plaintiffs, vs. Wells Fargo Bank N.A. and Valuation Information Technology LLC dba Rels Valuation, Defendants.
4:09-cv-01630-CW, April 14, 2009 (U.S. District Court for the Northern District of California).