Borrowers Seek Rehearing Before 4th Circuit over Class Decertification for Appraisal Independence Claims

A group of borrowers whose appraisal independence class action was decertified by the Fourth Circuit due to a lack of standing have requested rehearing.

The plaintiffs—borrowers who obtained mortgage refinances from a large national mortgage lender—brought claims against the lender for allegedly improperly influencing the appraisals used in connection with their loans.  They alleged that the lender provided information on estimated property values to the appraisers, which could in turn have improperly influenced the appraisers and resulted in appraisals which were higher than they should have been.  This allegedly deprived the borrowers of the independent appraisals which they paid for as part of the refinance process.

The district court certified a class action.  The Fourth Circuit originally affirmed the grant of class certification, but (as addressed in a prior article) subsequently decertified the class after re-evaluating the decision under a then-new Supreme Court decision on standing.  The court found that the plaintiffs provided no evidence that their appraisals in question were in fact tainted by the information provided by the lender to the appraisers.  Further, the appraisals resulted in the borrowers obtaining the refinances they sought, which often provided other benefits and monetary savings to the borrowers.  The Fourth Circuit ultimately found that the borrowers failed to show how they were harmed by the lender’s practice and in turn found that the class as a whole could not show standing.

The borrowers have now sought rehearing by the Fourth Circuit in an effort to restore the decision granting class certification.  They argue that the fact that they paid for an appraisal which they thought was independent—but which instead could have been influenced by the information provided by the lender to the appraisers—is sufficient to show they did not get what they paid for.  In turn, they claim this is an out-of-pocket monetary loss which is traditionally sufficient to provide standing.  They claim the decertification decision’s standing analysis conflicts with other standing decisions from both the Fourth Circuit and other federal courts of appeals.

Separately, the plaintiffs argue that the composition of the appellate panel which decided the case changed between the original decision affirming class certification and the subsequent panel that re-evaluated and decertified the class.  One of the appellate judges on the original panel was unable to take part in the subsequent revaluation and was replaced by a different district court judge sitting by designation.  The new judge served as the swing vote to decertify the class, and plaintiffs suggest that this is the only reason for the subsequent adverse result.