The State of New York has filed a lawsuit against eAppraiseIT alleging the company conspired with Washington Mutual Inc. to produce fraudulent appraisals. But the accusations are primarily based on just a few e-mails that marginally support the state’s case.
New York Attorney General Andrew M. Cuomo announced today that the lawsuit, filed in the Supreme Court of New York, New York County, against eAppraiseIT and its parent, the First American Corp., seeks to end the illegal relationship. In addition, penalties and disgorgement are also sought.
“The complaint filed today by the New York Attorney General against First American and our eAppraiseIT subsidiary has no foundation in fact or law,” First American said in a written statement.
The attorney general claims it has reviewed numerous e-mails confirming that eAppraiseIT bowed to pressure by WaMu to use a select group of “proven appraisers” that the lender knew would inflate fair market values. The national appraisal firm was allegedly motivated by the prospect of future business.
“The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market,” Cuomo said in the press release. “By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.”
The relationship between the lender and the appraisal firm began last year, Cuomo said. WaMu quickly became eAppraiseIT’s biggest customer, with around 262,000 appraisal orders completed through last month, and allegedly began campaigning for its own exclusive panel of appraisers.
The thrift was motivated by the higher volume of larger loans made possible through the alleged scam, the state alleges.
WaMu issued a statement indicating it is suspending its relationship with eAppraiseIT until they investigate the situation.
One of the e-mails Cuomo is basing his allegations on was reportedly from eAppraiseIT’s president indicating to senior executives that, in response to pressure for use of “proven appraisers” from WaMu, “we have agreed to roll over and just do it.”
He wrote in another message to First American that “We view this as a violation of the OCC, OTS, FDIC and USPAP influencing regulation,” Cuomo claims.
Another senior eAppraiseIT executive reportedly wrote in an e-mail, “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.”
But First American claims that the “handful of e-mails” the attorney general’s allegations are based on were “taken out of context, or mischaracterized.”
“An incomplete review of the facts, belie our record of compliance with applicable law,” First American’s statement continued. “The program called into question today by the attorney general has been vetted and approved by the federal regulator responsible for oversight of such programs. We welcome the opportunity to now present all the facts before an impartial third party.”
WaMu explained it has no incentive to promote inflated values.
“In fact, inflated appraisals are contrary to our interests,” the Seattle-based thrift said. We use third-party appraisal companies to make sure that appraisals are objective and accurate.“
Santa Ana, Calif.-based First American pledged to “vigorously defend the reputation of Washington Mutual and the reputation we have labored more than 100 years to build.”
