TBO.com - TBO is Tampa Bay Online

Cuomo Says Companies' Collusion Fed U.S. Mortgage Crisis

ADVERTISEMENT

By MICHAEL GORMLEY, The Associated Press

Published: November 2, 2007

ALBANY, N.Y. - New York Attorney General Andrew Cuomo said Thursday that a major real estate appraisal company colluded with the nation's largest savings and loan companies to inflate the values of homes nationwide, contributing to the subprime mortgage crisis.

"This is a case we believe is indicative of an industrywide problem," Cuomo said at a news conference.

Cuomo announced the civil lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of "proven appraisers," who, he claims, inflated home appraisals.

He also released e-mail that he said shows executives were aware they were violating federal regulations. The lawsuit filed in state Supreme Court in Manhattan seeks to stop the practice, recover profits and assess penalties.

"These blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market," Cuomo said in a statement. "By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion."
Washington Mutual said Thursday that it is suspending its relationship with eAppraiseIT and that it plans to investigate the situation.

"We have absolutely no incentive to have appraisers inflate home values," Washington Mutual said in a release. "We use third-party appraisal companies to make sure that appraisals are objective and accurate."

In a conference call, a First American lawyer said the company had been cooperating with the attorney general on the investigation and it is "discouraged" by the decision to sue.

"Now that we have a sense of the attorney general's approach, we're confident that once we've had the opportunity to set forth our response before an impartial arbitrator, our activities will be found appropriate," said general counsel Ken DeGiorgio.
Washington Mutual shares slid $2.13, or 7.6 percent, to close at $25.75 on a day when the stock market as a whole, and financial company stocks in particular, stumbled.

First American shares gained 40 cents to $30.50.

About 265,000 loans to individuals and families over 18 months were subject to inflated assessments, according to Cuomo. The amount the assessments exceeded true values isn't detailed in the lawsuit. But the e-mail indicates an early proposal would have increased assessments "5 percent with a cap of $50,000 if it is fully justified," according to Cuomo. That plan was rejected for the list of "proven appraisers."

"It's probably been going on forever," said Terry Dunkin, president of Appraisal Institute of professional real estate appraisers, who has worked for federal and state reforms.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT