Litigation in the Aftermath of the Sub-Prime Mortgage Crisis
Beginning in 2008, and so far in 2009, we have witnessed the near collapse of the housing market in the United States. Millions of families have, or will, suffer forecloser on their homes whose values are less than the mortgage they hold on that property. The buyers are but one party to the purchase of a home that has been damaged by overzealous players, one of which is the appraiser who can owe a duty to both mortgagee and mortgagor. The duty of an appraiser in Texas mirrors the duty of an architect, physician, or accountant. See Fed. Sav. & Loan Ins. Ass’n v. FDIC, 955 F.2d 261, 265 (5th Cir. 1992). Arguably, an appraiser’s professional work is relied upon by the homeowner because it serves as the basis for the buyer’s decision to buy the home at the sale price. Further, negligent appraisal can cause a buyer to borrow more money than they should because they are unaware of the risk they are taking. Negligently inflated home appraisals can give rise to causes of action that include negligent misrepresentation; professional malpractice; fraud; breach of contract; and DTPA claims.
Timing is an important factor in any case, as the Statute of Limitations (SOL) is an important concern. While some states allow for 3, 4, or 6 year statute of limitations on professional malpractice, Texas has a two year SOL. In most cases, the discovery exception will be required to toll the SOL. Litigating appraisal of a home years after the appraisal was made also requires special expertise in assigning an appraisal at a remote time in the past. The value of a home might rise (in normal economic times) or decrease over time (as has been seen in the last year), but it is the value of the home at the time of the appraisal that is key to a finding of an inflated appraisal.