Appraisal Company In Trouble Over Mortgage Fraud
NY’s Attorney General has sued First American saying its subsidiary gave inflated appraisals that helped cause the current mortgage crisis . . .
First American in mortgage fraud probe
By Ben White in New YorkFri., Nov. 2, 2007
A major US real estate appraisal company was accused on Thursday of conspiring with one of the country’s biggest banks to inflate home prices in a scheme that New York state officials said helped fuel the mortgage crisis.Andrew Cuomo, New York attorney-general, filed a lawsuit against First American saying its eAppraiseIT subsidiary gave in to pressure from Washington Mutual, the biggest savings and loans group in the US, to use a preferred list of appraisers who allegedly provided inflated values for homes.
WaMu allegedly profited from the scheme because it allowed the lender to close more home loans at greater values. eAppraiseIT in turn became WaMu’s biggest client, according to the lawsuit. “We tend to look for cases that are emblematic of systemic industry-wide fraud and we believe this case does that,” Mr Cuomo told a news conference.
WaMu, which at the end of last year had $346bn in assets, was not named as a defendant in the suit. Mr Cuomo said this was in part because of jurisdictional questions about his office’s authority over federally regulated banks such as WaMu.
WaMu said: “We are suspending our relationship with eAppraiseIT until we can further investigate the situation. We have absolutely no incentive to have appraisers inflate home values. In fact, inflated appraisals are contrary to our interests. We use third-party appraisal companies to make sure that appraisals are objective and accurate.”
First American said the complaint was based on a few emails taken out of context and “has no foundation in fact or law”.
It added: “The programme called into question today by the attorney-general has been vetted and approved by the federal regulator responsible for oversight of such programmes.”WaMu shares closed down 8 per cent at $25.75. First American shares closed up 1 per cent at $30.50.
In announcing the complaint, Mr Cuomo said: “The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market. By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.”
Mr Cuomo’s complaint includes e-mail messages from First American and eAppraiseIT executives that he said demonstrate the pressure from WaMu to inflate values.