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Mortgage Lending: 7.6.6.3 Retrospective and Review Appraisals

A retrospective appraisal is sanctioned by the USPAP and looks at comparable sales at the time the original appraisal was done.778 A retrospective appraisal should be accepted as evidence of the value of the house at the time of the transaction.779 The weak point of a retrospective appraisal is that the home’s condition may have changed.

Mortgage Lending: 7.6.7.2 Fact Versus Opinion

Generally, to state a UDAP, fraud, or negligence claim, one must show that the misrepresentation was factual and not an opinion.813 This usually requires a showing that the appraisal is wrong in the reported facts and not just in the valuation.814 For example, showing that the appraiser added 1000 square feet or more to a house, added extra rooms, or reported that the house had amenities it lacked—all factual matters that would tend to increase the home’s value—can help establish that the ap

Mortgage Lending: 7.6.7.3 Reliance

Reliance is likely to be a necessary component of a fraud or negligent misrepresentation claim,822 though not of other causes of action.823 But it may, nevertheless, help show standing.

Consumer Banking and Payments Law: Section 3-409. Acceptance of Draft; Certified Check.

(a) “Acceptance” means the drawee’s signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee’s signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.

(b) A draft may be accepted although it has not been signed by the drawer, is otherwise incomplete, is overdue, or has been dishonored.

Consumer Banking and Payments Law: Section 3-412. Obligation of Issuer of Note or Cashier’s Check.

The issuer of a note or cashier’s check or other draft drawn on the drawer is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder, or (ii) if the issuer signed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407. The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under Section 3-415.

Official Comment

Consumer Banking and Payments Law: Section 3-415. Obligation of Indorser.

(a) Subject to subsections (b), (c), (d), (e) and to Section 3-419(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.

Consumer Banking and Payments Law: Section 3-416. Transfer Warranties.

(a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that:

(1) the warrantor is a person entitled to enforce the instrument;

(2) all signatures on the instrument are authentic and authorized;

(3) the instrument has not been altered;

Consumer Banking and Payments Law: Section 3-417. Presentment Warranties.

(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that:

Consumer Banking and Payments Law: Section 3-501. Presentment.

(a) “Presentment” means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.

(b) The following rules are subject to Article 4, agreement of the parties, and clearing-house rules and the like:

Consumer Banking and Payments Law: Section 3-502. Dishonor.

(a) Dishonor of a note is governed by the following rules:

(1) If the note is payable on demand, the note is dishonored if presentment is duly made to the maker and the note is not paid on the day of presentment.

(2) If the note is not payable on demand and is payable at or through a bank or the terms of the note require presentment, the note is dishonored if presentment is duly made and the note is not paid on the day it becomes payable or the day of presentment, whichever is later.

Consumer Banking and Payments Law: Section 3-503. Notice of Dishonor.

(a) The obligation of an indorser stated in Section 3-415(a) and the obligation of a drawer stated in Section 3-414(d) may not be enforced unless (i) the indorser or drawer is given notice of dishonor of the instrument complying with this section or (ii) notice of dishonor is excused under Section 3-504(b).

Consumer Banking and Payments Law: Section 3-601. Discharge and Effect of Discharge.

(a) The obligation of a party to pay the instrument is discharged as stated in this Article or by an act or agreement with the party which would discharge an obligation to pay money under a simple contract.

(b) Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the instrument without notice of the discharge.

Official Comment

Consumer Banking and Payments Law: Section 4-103. Variation by Agreement; Measure of Damages; Action Constituting Ordinary Care.

(a) The effect of the provisions of this Article may be varied by agreement, but the parties to the agreement cannot disclaim a bank’s responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank’s responsibility is to be measured if those standards are not manifestly unreasonable.

Consumer Banking and Payments Law: Section 4-105. “Bank”; “Depositary Bank”; “Payor Bank”; “Intermediary Bank”; “Collecting Bank”; “Presenting Bank”.

In this Article:47

(1) [“Bank” means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company;]

(2) “Depositary bank” means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;

(3) “Payor bank” means a bank that is the drawee of a draft;

Consumer Banking and Payments Law: Section 4-110. Electronic Presentment.

(a) “Agreement for electronic presentment” means an agreement, clearing-house rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item (“presentment notice”) rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.

Consumer Banking and Payments Law: Section 4-111. Statute of Limitations.

An action to enforce an obligation, duty, or right arising under this Article must be commenced within three years after the [cause of action] accrues.

As added in 1990.

Official Comment

This section conforms to the period of limitations set by Section 3-118(g) for actions for breach of warranty and to enforce other obligations, duties or rights arising under Article 3. Bracketing “cause of action” recognizes that some states use a different term, such as “claim for relief.”

Consumer Banking and Payments Law: Section 4-207. Transfer Warranties.

2002 amendments (not widely adopted, see Appx. A, Introduction) made minor changes to paragraph (a), as set out in the footnote below.

(a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:

(1) the warrantor is a person entitled to enforce the item;

(2) all signatures on the item are authentic and authorized;

Consumer Banking and Payments Law: Section 4-208. Presentment Warranties.

2002 amendments (not widely adopted, see Appx. A, Introduction) made minor changes to paragraph (a)(3), as set out in the footnote below.

(a) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that:

Consumer Banking and Payments Law: Section 4-214. Right of Charge-Back or Refund; Liability of Collecting Bank: Return of Item.

(a) If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer’s account, or obtain refund from its customer, whether or not it is able to return the item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of

Consumer Banking and Payments Law: Section 4-215. Final Payment of Item by Payor Bank; When Provisional Debits and Credits Become Final; When Certain Credits Become Available for Withdrawal.

(a) An item is finally paid by a payor bank when the bank has first done any of the following:

(1) paid the item in cash;

(2) settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or

(3) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.

Consumer Banking and Payments Law: Section 4-301. Deferred Posting; Recovery of Payment by Return of Items; Time of Dishonor; Return of Items by Payor Bank.

2002 amendments (not widely adopted, see Appx. A, Introduction) made minor changes to paragraph (a)(1), as set out in the footnote below.

(a) If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the settlement if, before it has made final payment and before its midnight deadline, it

Consumer Banking and Payments Law: Section 4-302. Payor Bank’s Responsibility for Late Return of Item.

(a) If an item is presented to and received by a payor bank, the bank is accountable for the amount of:

(1) a demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or