LPS and CoreLogic alert investors to FDIC appraisal complaint
[Update 1: Adds CoreLogic part of complaint] The Federal Deposit Insurance Corp. filed a complaint against Lender Processing Services and CoreLogic seeking to recover roughly $283 million in losses allegedly tied to appraisals that an LPS subsidiary and a CoreLogic affiliate conducted for Washington Mutual. In 2008, the FDIC took WAMU, which had a total of $307 billion in assets, into receivership and facilitated its sale to JPMorgan Chase (JPM). But according to regulatory filings by the two companies, the FDIC alleged LPS Appraisal LLC and CoreLogic Valuation Services, formerly known as eAppraiseIT, breached a contract with WAMU, claiming services provided to the bank allegedly broke federal and state law, regulatory guidelines and industry standards. The FDIC cites 220 residential appraisals performed by the LPS appraisal management company between June 2006 and May 2008 as the source of the damages and 194 appraisals by the CoreLogic affiliate between 2006 and 2007. CoreLogic said in a regulatory filing Wednesday that it has begun a review of the 194 cases and said more than 85% of the loans cited consisted of reviews of third-party appraisals, with most being "desk reviews." LPS also said in its regulatory filing that its cases largely involved desk reviews. Both companies said they would defend themselves. CoreLogic said it "continues to believe the FDIC’s factual allegations, legal theories and damage calculations have many flaws, and the company intends to defend itself vigorously." LPS said it "believes that any loan losses are not because of appraisal issues, but are due to the quality of underwriting by WAMU, borrowers defaulting and the weakness of the economy after the loans were made, among other factors," LPS said in a regulatory filing about the FDIC complaint. The FDIC complaint is the latest in a flurry of legal action involving LPS. Most center around questionable documentation and foreclosure activities that have sparked investigations, spats with foreclosure defense attorneys, drew sanctions against the company, and forced it to sign consent orders with federal regulators pledging to review more loans and correct issues found. Executive Editor Kerry Curry contributed to this report. Write to Jon Prior. Follow him on Twitter @JonAPrior.