FDIC is acting as the receiver for the late Washington Mutual Bank, which was seized by the federal government in 2008. Now they are hunting for money using their legal guns, pointing the barrel at Corelogic and LPS.
The FDIC is trying to build a case that CoreLogic and LPS overvalued homes it appraised to the point of “gross negligence.”: The FDIC claims that about 75% of the appraisals it examined were inflated.
Clearly FDIC has its hands full with this case given the depth of the disclaimers on appraisals, and the awareness that Washington Mutual Bank had of the methodologies of the appraisal opinions. As long as CoreLogic and LPS Appraisals did not substantially deviate from the methodology, the case should not go far.
The volume of properties considered under the lawsuit is a relatively small number – 194 performed by CoreLogic, 220 performed by LPS. Together the FDIC suit calls for $283 million in damages – or an average per property of $683k. The count is low because most of the WaMu loans were packed up and sold to investors.
If FDIC is able to prove its case, you can rest assured that owners of the securities that purchased loans from WaMU and other banks will be sending an army of lawyers to the federal court house steps with suits against CoreLogic and LPS.
Everyone seems to be looking for someone to blame for the housing market crash. Unfortunately our industry friends at CoreLogic and LPS are in the heard.