TCF National Bank filed a federal lawsuit in Minneapolis this week alleging that a Massachusetts firm it hired to appraise and evaluate nearly 3,000 residential properties defrauded the bank by producing inflated valuations.
TCF hired Market Intelligence Inc. of Milford, Mass., to evaluate and appraise residential properties before it issued mortgages against them. One of the services the firm provided included "Field Asset Verifications," which involved having someone drive by a property before the loan issued, the suit says.
From 2002 until the arrangement was terminated in June 2005, Market Intelligence did field evaluations -- which are not full appraisals -- on 2,989 loans worth $300 million, says the lawsuit, which was filed Wednesday in U.S. District Court in Minneapolis.
TCF says it later discovered that many of the drive-by inspections "grossly overestimated the value" of certain properties that were securing loans in default or foreclosure. The valuations were so far off the mark, the suit says, that they could only have resulted from "gross negligence, malfeasance, or willful misconduct."
Representatives of Market Intelligence could not be reached immediately for comment Thursday.
In once case, TCF executive vice president Tim Meyer wrote to Market Intelligence about a drive-by evaluation it conducted in August 2002. A customer bought the property a year earlier for $149,000, and the county assessed it at $120,000.
The customer estimated the value at $235,000, and TCF ordered a drive-by evaluation, which came back at $210,000. TCF paid for a full appraisal, which put the value at $165,000. Market Intelligence assured TCF that it was not doing anything that would hype the value of a property.
In the lawsuit, TCF contends that agents working for Market Intelligence sometimes ignored comparable sales or assessed values, disregarded problems that were plainly visible from the street or blindly relied on a property owner's estimate of value without independently analyzing the property.
TCF has since foreclosed on or charged off loans exceeding $3.3 million, the suit says, and the amount could increase.
The suit accuses Market Intelligence and its purported successor companies -- Fidelity National Information Services Inc. and Lender Processing Services Inc., both based in Jacksonville, Fla., and LSI Appraisal, of Wilmington, Del. -- of fraudulent inducement, fraud, consumer fraud, negligence, gross negligence, deceptive trade practices, interference with business relations and breach of good faith and fair dealing.
The bank is seeking unspecified damages.
Dan Browning • 612-673-4493