Reed Smith Client Alerts

In a decision issued on February 2, 2018, a Magistrate Judge for the U.S. District Court for the Northern District of Georgia issued an Order and Report and Recommendation in which she found that a referral arrangement between Amerisave Mortgage Corporation (“Amerisave”) and its affiliated appraisal management company, Nova Appraisal Management Corporation (“Nova”), did not qualify for the safe harbor provided in §8(c)(4) of the federal Real Estate Settlement Procedures Act (“RESPA”) for affiliated business arrangements (“AfBAs”).1   Mortgage lenders should take note.

The Facts

The decision in this case, which was filed as a putative class action, was rendered in the context of a motion for class certification.  As such, it is rather skimpy concerning the details of the arrangement between Amerisave and Nova.  Nevertheless, it appears that the arrangement was as follows: 

  • When a consumer applied to Amerisave for a mortgage loan, he/she would receive a RESPA-compliant AfBA disclosure statement setting forth the nature of Amerisave’s affiliate relationship with Nova.
  • After giving the consumer that disclosure, Amerisave would order an appraisal from Nova.
  • Nova in turn would order the appraisal from an independent appraiser, monitor the status of the order to ensure that the appraisal was delivered in a timely fashion, have the appraisal report reviewed by an independent third party and, if the report was deemed acceptable, deliver the report to Amerisave.
  • The consumer would be charged a $100 appraisal review fee for Nova’s services as well as the fee that Nova had to pay the independent appraiser for his/her report.
  • The only thing of value that would pass from Nova to Amerisave as part of this arrangement was a return on Amerisave’s ownership interest in Nova.