eAppraiseIT Sued By NY Attorney General Over Inflated Appraisals For Washington Mutual
Inflated appraisals have always been a part of the underside of the housing boom. Now that we are in the downturn many of the ugly secrets are coming out as homeowners are upside down in their loans. NY Attorney General Andrew Cuomo is suing eAppraiseIt, a division of First American Corp., for inflating appraisals done for Washington Mutual.
According to the suit, Anthony R. Merlo Jr., eAppraiseIT’s president, sent emails to his superiors at the parent company in which he first said his unit would “roll over” and submit to Washington Mutual’s demands on appraisals. Later, in an email, he wrote that he viewed the bank’s conduct as a violation of federal regulations.
The suit seeks an injunction to stop the alleged illegal activities and asks First American, a title insurer and provider of housing and mortgage data, for unspecified damages, restitution and disgorgement of gains obtained through the allegedly fraudulent acts. It says eAppraiseIT handled more than 260,000 appraisals in New York for Washington Mutual and received more than $50 million. via WSJ.com
Of course, Washington Mutual has now stopped using eAppraiseIt’s services.
But here is my rhetorical question that is so logical that it defies logic. Why would a lender force an appraiser to inflate loan value so that the potential for bad loans increases?
We know the answer, back when these loans were happening everyone was in need of a good chiropractor because their necks only allowed them to look up. But think of the world if the appraisers had held their ground and maintained their ethics. Many of the bad loans we are trying to unwind would never have been written.
Here are the emails that helped lead to the lawsuit.
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Comment by deansguide on 3 November 2007:
Tom,
First order of business thanks for the near heart failure on the “car commercial ghost story” I fell hook-line-sinker for that one.
I was a loan officer in the early ’90’s in the Wash D.C. area and my experience with appraisals was similar to this story.
In our little shop of 12, we had a guy we called “The Lock.” We called him the lock because when we needed more room to make a deal happen this guy would come in higher than anyone else on his appraisals.
We also called him the lock because we knew when we had him we could go out and lock in the rate. Back in DC in those days you had to have a real estate attorney to complete a transaction.
Consequently this extra step slowed deals down making a minimum lock time 45 Day and the norm 60 days!
Everyone in our shop knew this guy’s appraisals were off but we still used him.
Why isn’t WAMU liable for some of the heat? Without a doubt these loan officers and their management knew that the appraisals were too high. Why give the lender a walk on this stuff?
Dean
Comment by Lisa on 21 November 2007:
Hi All –
I work with a Seattle-based law firm that is investigating Washington Mutual and First American Corporation based on complaints the companies have conspired to artificially inflate housing appraisals.
As I am sure you are all well aware the appraisal of a home is important when determining the loan you will receive, including monthly payments, APR and more. If these prices were artificially inflated to benefit WaMu and First American it could mean you have overpaid for your home and subsequently have an inflated mortgage.
This could also cause problems if you ever fall behind on your loan—another lender isn’t going to accept the inflated value of your home–meaning you can’t refinance.
If you have a home loan from Washington Mutual you can learn more about this investigation by visiting http://www.hbsslaw.com/wm.htm.
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