A settlement with one of the nation’s largest appraisal companies indicates some of the jump in home prices during the boom was indeed manufactured by banks looking to hand out loans.
New York Attorney General Eric T. Schneiderman, announced Thursday the state had reached a $7.8 million settlement with First American Corp. and its division eAppraiseIT for allegedly colluding with Washington Mutual to inflate the value of homes through 2006 and 2007.
New York’s complaint against the divisions of the appraisal company, which is today known as CoreLogic, said WaMu pressured appraisers to come back with higher home values by in effect blacklisting appraisers who wouldn’t do it.
Basically, an appraiser is required to be independent of the loan process and is hired to use his or her expertise to place a fair market value on the property. However, if the appraised price does not meet the value of the loan being taken out to purchase the home, it could scrap the whole deal.
And, according to the NYAG, the collusion didn’t end with blacklisting honest appraisers. New York, claimed eAppraiseIT allowed WaMu to submit multiple reconsiderations of of value, when appraisals didn’t meet the value of the loan being sought.
Schneiderman’s office estimates First American did 260,000 appraisals for WaMu nationwide, but this settlement was only for 10,000 deals in New York.
The massive jump in home prices during the housing boom contributed to the economic woes the nation and state are still suffering. Because housing prices were over-inflated, when the economy crashed and reason prevailed, many homeowners locked into loans could not remortgage because the real value of the house was much lower than the outstanding loan.
Connecticut Attorney General George Jepsen’s office said there is no similar case underway in Connecticut, though eAppraiseIT was registered in the state and Washington Mutual was an active lender that foreclosed on many homes, especially in the Bridgeport area.