FNC, Inc. is once again at the center of a firestorm in the appraisal world– this time over a user agreement that appraisers fear signs away their E&O insurance coverage. Appraisers are required to authorize the agreement if they want to continue working with many of the nation’s largest lenders via AppraisalPort. While the agreement does not appear to effect the E&O of appraisers, it does seem to burden them with the additional liability of defending FNC, should a legal issue arise over an appraisal delivered via AppraisalPort.
The new user agreement was announced by FNC in September. After strong pushback by appraisers, the company announced just prior to press time that the planned implementation of the new agreement would be “deferred to accommodate further industry comments.” According to Neil Olson, Chief Legal Officer for FNC, the company decided to back off of its push for the new user agreement because the issue is a “distraction.” “We thought we’d take a step back, examine the language, consider the feedback and perhaps issue a redraft,” he told WRE. Many appraisers expressed relief at not having to shoulder the new liability. But what many may not realize is that the AppraisalPort user agreement currently in place contains “hold harmless” language that is almost identical to that found in the new version, which so many appraisers object to.
At the center of the liability issue is really the integrity of the process that converts and delivers reports from an appraiser’s desktop to a lender via third-parties such as AppraisalPort. Here’s why: who is on the legal hook when a loan goes bad due to a questionable appraisal? The answer is easy if the report a lender receives is identical to the one the appraiser sends. If the report is truncated or scrambled in the conversion/delivery process resulting in a less complete or otherwise different report, however, then the answer of who bears legal responsibility for an error or omission is messy. Language in the AppraisalPort user agreement (old and new) seems to be an attempt by FNC to deflect responsibility no matter who or what is at fault, making appraisers liable for the defense of FNC, should the company be drawn into a lawsuit over an appraisal sent via AppraisalPort.