More On NY AG Suit Alleging Puffed Up Appraisals

Syndicated columnist Kenneth Harney recently wrote a piece on the lawsuit brought by New York Attorney General Andrew M. Cuomo against First American Corp. and its appraisal management subsidiary, eAppraiseIT, alleging the practice of illegally inflated real estate appraisals. Highlights from the column:

• Cuomo's suit, which rattled mortgage lenders, appraisers and settlement service companies nationwide, accused First American and eAppraiseIT of knuckling under to illegal pressure from Washington Mutual, the giant Seattle lender, to hit the numbers needed to close loan deals.

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• Washington Mutual was not named as a defendant in the complaint because, as a federally regulated bank, it is buffered from certain state legal attacks. In a statement, Washington Mutual said it was both "surprised and disappointed by the allegations," and has suspended business with eAppraiseIT pending its own investigation of the matter.

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• Frank Gregoire, chairman of the Florida Real Estate Appraisal Board and a St. Petersburg appraiser, said "every appraiser deals with this stuff every day," routinely confronting threats of nonpayment and blacklisting if he or she refuses to play the game. Perry "Pat" Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that "it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street," where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors. "And they all think they're never going to get caught," said Turner.

For more, see Banks bullying appraisers to boost values bad news (San Francisco Chronicle).

To view the New York AG's lawsuit, see Cuomo vs. First American Corporation and First American eAppraiseIT.

Go here to view E-Mail Excerpts in eAppraiseIT Case.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT. Cuomo OFHEO Fannie Mae Freddie Mac