Attorney General Andrew Cuomo announced today that he is suing First American Corp. and its subsidiary, appraisal company eAppraisal, for allegedly colluding with Washington Mutual.
Cuomo accused eAppraisal of inflating the value of homes it appraised for mortgages, under pressure from WaMu. He said that this case is just one example of a “systemic flaw in the mortgage industry” with far reaching implications.
The attorney general said that e-mails between top executives of all three companies, found during his office’s nine month investigation, revealed that WaMu had requested “reconsiderations of value” when appraisals did not meet the figures it wanted. Cuomo’s office said that WaMu had also pressed eAppraisal to use a list of “proven appraisers” the bank had selected when evaluating homes for WaMu’s mortgages.
Cuomo said that inflated appraisals damaged the housing market. When a homeowner wants to refinance or sell their home, or if the house is foreclosed on, the original mortgage exceeds the actual value of the house, and the homeowner ends up in “a mountain of debt,” he said.
Cuomo said he has not begun litigation against Washington Mutual because of “questions about state attorney generals’ jurisdiction on federal institutions.” Cuomo claimed that the collusion between the three companies was “another example of where the federal government is asleep at the switch.”