Courts rule NY State can pursue suit against inflated appraisals
The New York State Court of Appeals ruled that Attorney General Eric Schneiderman could pursue a lawsuit that accuses California-based First American Corp. and its former eAppraiseIT unit of colluding with Washington Mutual to inflate home values. According to Reuters, the ruling, issued today, ensures that federal law does not preclude individual states from pursuing claims of fraud against real estate appraisers.
In 2007, then-New York State Attorney General Andrew Cuomo filed the suit against the three parties, alleging they violated laws that attempt to ensure independent real estate appraisals. The suit claims that Washington Mutual pressured First American and eAppraiseIT to use inflated appraisals so that the bank could in turn make larger loans, collect higher fees and win more business.
First American and eAppraiseIT had been arguing that only federal law applied to appraisals, but today’s decision renders them prey to the AG suit.
Washington Mutual has since failed, largely as a result of the home loans it originated. Meanwhile, First American Corp. split last year into two firms, CoreLogic, which is now the parent of eAppraiseIT, and First American Financial Corp. [Reuters]