FNIS Files Federal Lawsuit Against Pennsylvania Appraisal Board

August 28, 2002

PHILADELPHIA, /PRNewswire-FirstCall/ -- A newly filed Federal lawsuit has become the latest battleground in a fight to lower mortgage loan fees and speed up the loan approval process for consumers seeking home equity loans.

The lawsuit was filed yesterday by Fidelity National Information Solutions (Nasdaq: FNIS) and Market Intelligence, FNIS' property valuation subsidiary, against the Pennsylvania State Board of Certified Real Estate Appraisers.Click Here[pdf] for the Complaint document .

The lawsuit alleges that the Pennsylvania Appraisal Board is improperly forcing banks and consumers to use slower and more costly appraisals instead of Federally approved appraisal alternatives for residential borrowers applying for loans in Pennsylvania. The Philadelphia-based law firm of Ballard Spahr Andrews & Ingersoll, LLP is representing the plaintiffs in the case.

This is the second time in two years that Market Intelligence, which provides appraisal alternatives as well as traditional appraisals, has sued a state appraisal board to defend the use of so-called "appraisal alternatives" to assess the value of property offered as collateral in home equity lending.

Similar to a lawsuit filed in Oregon in 2000, the lawsuit alleges that, by requiring the use of appraisals in all lending transactions, the Pennsylvania Appraisal Board is defying Federal banking laws and attempting to halt Federally approved banking practices that benefit consumers in the state.

Market Intelligence fought the Oregon appraisal board over the same issue and prevailed in October 2000 after the Oregon Appraisal Board agreed to allow Market Intelligence to use the faster, less expensive appraisal alternatives instead of the more expensive traditional appraisals. Among the appraisal alternatives at issue is the use of computer generated estimates of value known as AVMs, which cost less than 10 percent of the typical $300 appraisal and can take seconds to perform instead of several days or weeks.

"If federal banking laws say it's okay and it benefits both the banks and consumers, why would any state agency want to fight it?" said Mark P. Sennott, an executive vice president at FNIS. "It appears to me that only one group benefits by the board's actions."

The Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 expressly allows banks to use appraisal alternatives for loans less than $250,000. What's more, dozens of banks making mortgage loans in the state of Pennsylvania use appraisal alternatives for home equity lending.

But in correspondence to Market Intelligence in 1999, the Pennsylvania appraiser board asserted that all value estimates for residential properties "must be made by a Pennsylvania State certified appraiser." And in a June 17 letter to the Company, the board threatened to file formal charges against the Company. Despite numerous attempts to work with the board, the company was unable to convince them that their position conflicts with Federal law.

"This is 'deja vu' all over again," said Sennott. "As we have said all along, we are not against appraisals or appraisers. Consistent with governing Federal law, we just think that banks and consumers should be able to have a choice in when an appraisal is necessary and when a faster and cheaper alternative will work just as well."

Sennott said that there is substantial lending industry pressure to reduce the time and cost of the loan application. In some cases, appraisals are necessary. But in many cases, banks have become comfortable using computer-assisted estimates of value for smaller loans, said Sennott. FNIS uses the computer estimates of value and also uses real estate agents to gather data to run the automated valuation models.

Click Here[pdf] for the Complaint document .

Source: Fidelity National Information Solutions

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