Chase Denies Responsibility for Bankrupt AMC Debt

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Editor’s Note: The bankruptcy earlier this year of the appraisal management company (AMC) ESA left millions in unpaid fees to appraisers, agents and brokers, who now are trying to collect from Chase, the bank who hired the AMC.  What happens will have far-reaching effects on the appraiser-AMC relationship and the industry.

Chase Denies Responsibility for Bankrupt AMC Debt

by Isaac Peck, Associate Editor

The bankruptcy of Evaluation Solutions/ES Appraisal Services (ESA) left $11 million in unpaid debts to its vendors and creditors, with a large portion owed to real estate appraisers and agents/brokers.

As WRE reported last month, (Stiffed Appraisers Go After Chase), the Florida court overseeing the ESA bankruptcy is considering granting a Bar Order that would absolve JPMorgan Chase, the principal client for all services performed, of all liability for fees due to real estate appraisers, agents, and brokers who performed millions of dollars of work on Chase loans. Much hangs in the balance: if Chase is successful, it means lenders who contract with AMCs for appraisals, broker price opinions (BPOs) and other services, would have no financial responsibility to make good on fees owed to the end contractors, such as appraisers, by bankrupt or otherwise malfeasant AMCs.

Chase Denies Responsibility
In its legal response to appraisers and agents who argue that Chase is liable for the unpaid work under federal laws such as Dodd-Frank, FIRREA, and OCC guidelines, Chase’s lawyers write: “Nothing further in FIRREA, or the Dodd-Frank Act amendments to FIRREA, the OCC regulations, or USPAP addresses payments to appraisers.”

Chase also seems to deny that it was the client for the appraisals and BPOs ordered (Chase is listed as the client on the appraisal reports), and also seems to question the notion that ESA was their agent.  Chase’s lawyers write: “The appraiser’s client remains the party who, by employment or contract, engages the appraiser. Otherwise, there is nothing in federal law governing the payment of appraisers and nothing requiring a federally-regulated institution such as Chase to backstop or guarantee payment to appraisers engaged by an independent appraiser management company (“AMC”) such as Evaluation Solutions, even if that AMC is acting as the regulated institution’s agent for compliance with FIRREA and its implementing regulations.”

Chase’s lawyers insist that “Agent is nowhere defined in the OCC regulations.”

Due to this lack of definition, Chase’s lawyers define an agency relationship under Florida common law as the following: “An agency relationship may be established expressly or by estoppel (i.e. an apparent agency relationship). The standard for determining whether an agency relationship exists is whether the purported principal has control over the alleged agent.”

Using this definition of an agency relationship, Chase’s lawyers appear to deny that an agency relationship existed between Chase and ESA, even though Chase is listed as the client on all of the appraisals delivered to Chase and despite the fact that numerous federal regulations, including FIRREA, require Chase to engage appraisers in one of two ways only: either directly or through an agent such as an AMC.

The appraisers, agents, and brokers who are seeking to hold Chase responsible for their unpaid fees insist that Chase is liable precisely because ESA was their agent, and Chase must be held accountable for the actions of its agent.

NOLO’s Plain English Law Dictionary defines agency as:
“The relationship of a person (called the agent) who acts on behalf of another person, company, or government, known as the principal. The principal is responsible for the acts of the agent, and the agent’s acts bind the principal.”

Fighting Back
Sirima Chantalakwong is a BPO Agent in California whose company, ProValue, Inc., is owed $44,000 for BPOs performed over a six-month period.  She is the principal claimant in the class action lawsuit filed on behalf of appraisers and agents/brokers across the country who are left unpaid by ESA.

Having requested to remain anonymous previously, Chantalakwong, referred to in earlier stories as Shelley Smith, and her husband Dan (Owner of the Evalonlinecomplaint Facebook page), have been crucial in organizing the opposition to Chase’s Bar Order and are the ones who initially hired lawyer Breck Milde, whose law firm appeared in the Florida Bankruptcy court to oppose the Bar Order.

After the initial hearing in Florida on June 4, 2013, where Milde opposed the Bar Order and urged the bankruptcy judge not to absolve Chase of its responsibilities to make good on the unpaid fees, both sides were given additional time to file proposed findings of fact and conclusions of law.

Counter Suit
In a further development, the Trustee of ESA’s bankruptcy proceedings has filed a motion seeking sanctions against ProValue, Inc., arguing that ProValue is in violation of the automatic stay granted to ESA as terms of the bankruptcy.  ProValue is ordered to appear in court on July 10, 2013 to defend its position. The Trustee is arguing that ProValue is liable for compensatory and punitive damages, as well as attorneys’ fees and costs for its attempt to block the Bar Order and prevent Chase from denying responsibility.

Appraisers, Agents Urged to Complain to Regulators
Chantalakwong is urging appraisers and agents to file complaints with Chase’s regulators and let them know about the position Chase is taking.  She encourages appraisers and agent/brokers to cite the laws in the petition (found below) in their complaints and to urge regulators to require Chase to take responsibility for their agent, and enforce the federal regulations that require Chase to compensate appraisers with a customary and reasonable fee.

The question of whether lenders are responsible if the AMCs they use fail to pay contractors, such as appraisers, will have far-reaching and long-lasting effects on the industry, many insiders believe.

Complaint Form:  Chantalakwong says appraisers and agents/brokers can use the following complaint form to contact regulators. She recommends using a personalized message and citing relevant laws (found in the petition): https://appsec.helpwithmybank.gov/olac_form/

Petition: Chantalakwong says appraisers and agents/brokers can use the following petition to ask Chase to take responsibility for their agent: http://www.change.org/petitions/jpmorgan-chase-take-responsibility-for-the-unpaid-fees-of-your-agent.

 

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One Comment

  1. I agree, we get blamed for eehiytvrng these days. have seen alot of bad work out there lately, it seems even worse than before all of this fraud hysteria. I have been trying to tell all of my associates that they need to be able to back-up eehiytvrng they state in their reports, because everyone is checking, and they have the means to do it. We’ve been getting requests to check the accuracy of the neighborhood ratings, market conditions, marketing times Etc of reports that have been reviewed. I do like not getting phone calls from LO’s at all hours of the day and night beating me up because the appraisal didn’t make value. I don’t miss that at all. When I started in 1974, I was taught that checking the value for a client or homeowner was part of our service, now its against the law. I was also taught,not to cross the line, no matter what. Back then, I trained with 5 different MAI appraisers and I didn’t do anything on my own until they all thought I was sufficently trained. Now days, these new guys come in, ride around for a couple of weeks with some appraiser with not much more experience, and they are out there appraising, if that is what you call it. These are the same people the HVCC was made for and consequently, they are the only guys stupid enough to do a $150-$200 appraisal. So this new Code has done nothing but put a lot of people out of business. The emphasis should be on adequate training. There should be some sort of apprentice program. Train with three or four different highly experienced appraisers. Give the Appraisers doing the training ACE credit. Get back to basics. I’m tired of these so called underwriters, reviewers, AMC helpers, who in most cases don’t know the first thing about appraising, except what’s in their little manual, and if it doesn’t fit into their little envelope, they freak. We should be dictating to them. I spend most of my days trying to explain very basic appraisal principal and logic to a bunch of idiots. If you really want to freak em out, no matter what their request is,tell them that it is a violation of USPAP, or some rule, or throw in the coersement word and the become instantly silent. They dont know what any of that is, no clue, nada, We all need to start speaking up, before it’s too late. I’ll go ahead and shut-up now, It’s early and I’ve been here all night. Happy Sunday!! Thanks

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