New York Attorney General, Andrew Cuomo, announced today that he’s suing one of the nation’s largest real estate appraisal firms for conspiring with Washington Mutual to artificially inflate appraisals.

WaMu is accused of providing First American with a list of “Proven Appraisers” who had a track record of bringing in more expensive appraisals. According to law, real estate appraisals are supposed to be independent in order to avoid the obvious conflict of interest between lender and appraiser. Cuomo says internal emails prove the company knew that their actions were illegal, but caved to pressure from WaMu in order to secure future business from the lender.

“The independence of the appraiser is essential to maintaining the integrity of the mortgage industry. First American and eAppraiseIT violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike,” said Cuomo in a statement. “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.”

The emails the AG’s office quotes in the statement are damning. Here they are:

• On February 22, 2007, in response to a description of the WaMu “Proven Appraiser” program as one in which “we will now assign all Wamu’s work to Wamu’s ‘Proven Appraisers’… [and] Performance ratings to retain position as a Wamu Proven Appraiser will be based on how many come in on value,” eAppraiseIT’s president told senior executives at First American: “we have agreed to roll over and just do it…”
• On April 4, 2007, eAppraiseIT’s executive vice president stated in an e-mail to First American: “we as an AMC [Appraisal Management Company] need to retain our independence from the lender or it will look like collusion… eAppraiseIT is clearly being directed who to select. The reasoning… is bogus for many reasons including the most obvious – the proven appraisers bring in the values.”
• On April 17, 2007, eAppraiseIT’s president wrote an e-mail to First American explaining why its conduct was illegal: “We view this as a violation of the OCC, OTS, FDIC and USPAP influencing regulation.”
• E-mail evidence also shows that WaMu pressured EA to inflate appraisals as a condition for doing future business together:
• On September 27, 2006, First American’s vice chairman reported that a WaMu executive told him: “if the appraisal issues are resolved and things are working well he would welcome conversations about expanding our relationship…”

NY ATTORNEY GENERAL SUES FIRST AMERICAN AND ITS SUBSIDIARY FOR CONSPIRING WITH WASHINGTON MUTUAL TO INFLATE REAL ESTATE APPRAISALS [New York AG]

THE PEOPLE OF THE STATE OF NEW YORK by ANDREW M. CUOMO, Attorney General of the State of New York, VS FIRST AMERICAN CORPORATION and FIRST AMERICAN EAPPRAISEIT (PDF) [New York AG]

(Photo:meghannmarco)

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