FDIC files complaint against LSI, CoreLogic, f/k/a eAppraiselIT and others for negligence and breach of contract.

The Federal Deposit Insurance Corp. has filed a complaint against Lender Processing Services Inc. related to an alleged breach of contract with the now defunct Washington Mutual Bank to recover $154.5 million in losses, according to a Securities and Exchange Commission filing.

The FDIC filed the suit in its capacity as receiver for WAMU May 9 in the U.S. District Court for the Central District of California. The suit relates to 220 appraisal reviews performed between June 2006 and May 2008.

The suit states that the losses were caused by the alleged gross negligence of LPS with respect to certain services of its appraisal management subsidiary LSI Appraisal LLC. The FDIC claims that the services provided “failed to conform with federal and state law, regulatory guidelines and other industry standards, including specifically the provisions of the Uniform Standards of Professional Appraisal Practice,” according to the SEC filing.

In more than 75 percent of the 220 appraisals cited in the suit, LSI was contracted only to provide reviews of the appraisals, not to conduct the initial, full appraisals, the SEC filing stated.

LPS (NYSE: LPS), of Jacksonville, provides technology and services to the mortgage and real estate industries.

The SEC filing states that LPS believes there is no basis for the claim against LSI: “LPS 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.”

WAMU, which was based in Henderson, Nev., became the largest bank in U.S. history to fail when it was closed by the FDIC in September 2008 and taken over by JPMorgan Chase Bank. WAMU, along with its subsidiary Washington Mutual FSB, had combined assets of $307 billion.

In an emailed response, LPS spokeswoman Michelle Kersch stated, “LPS intends to aggressively defend these allegations.”

Separately, the FDIC also, as receiver of WAMU, filed a complaint against CoreLogic Valuation Services LLC, f/k/a eAppraiselIT LLC and several of its current and former affiliates alleging gross negligence and breach of contract.

CoreLogic said in an SEC filing, “The company continues to believe the FDIC’s factual allegations, legal theories and damage calculations have many flaws, and the company intends to defend itself vigorously.”

SOURCE: Jacksonville Business Journal

http://www.bizjournals.com/jacksonville/news/2011/05/11/fdic-files-complaint-against-lps.html

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