Date of conduct determines statute of limitations in professional negligence causes of action.
Banking industry (Laws, regulations and rules)
Real estate appraisers (Laws, regulations and rules)
Negligence (Laws, regulations and rules)
Pub Date:
Name: Appraisal Journal Publisher: The Appraisal Institute Audience: Trade Format: Magazine/Journal Subject: Business; Real estate industry Copyright: COPYRIGHT 2011 The Appraisal Institute ISSN: 0003-7087
Date: Fall, 2011 Source Volume: 79 Source Issue: 4
Event Code: 930 Government regulation; 940 Government regulation (cont); 980 Legal issues & crime Advertising Code: 94 Legal/Government Regulation Computer Subject: Banking industry; Government regulation
Product Code: 6531200 Real Estate Appraisers NAICS Code: 53132 Offices of Real Estate Appraisers SIC Code: 6021 National commercial banks; 6022 State commercial banks; 6029 Commercial banks, not elsewhere classified; 6531 Real estate agents and managers
Company Name: Flagstar Bank F.S.B.
Geographic Scope: United States; Ohio Geographic Code: 1U3OH Ohio

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According to the Supreme Court of Ohio, an action for negligence against an appraiser accrues when the act is committed and does not reset for each subsequent purchase of a mortgage loan.

In 2001 and 2002, an appraiser performed appraisals on three separate properties that served as collateral for three separate mortgage loans made by Airline Union's Mortgage Company (AUM). Flagstar Bank purchased the loans from AUM after reviewing the appraisals. Flagstar later sold two of the loans. The owners of the two properties defaulted on their loans and the properties were foreclosed. This left deficiency balances, which Flagstar paid. The property that was security for the third loan burned down, and the owner defaulted. The insurance proceeds left a deficiency balance on this loan.

In April 2008, Flagstar filed a complaint against AUM and the appraiser. They alleged that the appraisals were materially inaccurate, and the actual fair market value was significantly less than the appraised value. The appraiser filed a motion for summary judgment and claimed that the statute of limitations barred Flagstar's claims because the complaint was filed more than four years after the appraisals were performed. Flagstar argued that the statute of limitations did not begin to run until the bank sustained a compensable injury. The bank claimed the injury did not occur until the two properties were sold at foreclosure, which left a deficiency balance, and the insurance proceeds were insufficient to cover the balance on the loan on the third property.

The Supreme Court of Ohio determined that a cause of action for professional negligence accrues when the act is committed, subjecting appraisers to potential negligence suits for four years from the date the appraisal was performed. The court declined to reset the statute of limitations for each purchase of a mortgage loan simply because the purchaser's damages may be delayed until some point in the future. The court believed that this would, in effect, produce an unending statute of limitations and, given the volatile nature of the housing market, be inconsistent with the purposes of statutes of limitations.

Flagstar Bank, F.S.B. v. Airline Union's Mortgage Company

Supreme Court of Ohio

April 27, 2011

947 N.E.2d 672 (Ohio)
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