- The Washington Times - Friday, November 2, 2007

ALBANY, N.Y. (AP) — New York Attorney General Andrew Cuomo said yesterday that a major real-estate-appraisal company colluded with the nation”s largest savings and loan companies to inflate the values of homes nationwide, contributing to the subprime mortgage crisis.

This is a case we believe is indicative of an industrywide problem, Mr. Cuomo said at a press conference.

Mr. Cuomo announced the civil lawsuit against EAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual Inc. to use a list of proven appraisers, who he says inflated home appraisals.

He also released e-mails that he said show that executives were aware that they were violating federal regulations. The lawsuit filed in state Supreme Court in Manhattan seeks to stop the practice, recover profits and assess penalties.

These blatant actions of First American and EAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market, Mr. Cuomo said in a statement. By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.

Washington Mutual said yesterday that it is suspending its relationship with EAppraiseIT and that it plans to further investigate the situation.

We have absolutely no incentive to have appraisers inflate home values, Washington Mutual said. We use third-party appraisal companies to make sure that appraisals are objective and accurate.

First American said the lawsuit against its subsidiary has no foundation in fact or law and called Mr. Cuomo”s accusations specious.

Mr. Cuomo said investors were hurt by buying mortgages based on inflated property values. He added that consumers will suffer for years because they were stuck with mortgage payments based on unrealistic values for their properties, a problem that will worsen as housing sale prices drop in much of the country.

About 265,000 loans to individuals and families over 18 months were subject to the inflated assessments, Mr. Cuomo said. The amount that the assessments exceeded true values isn”t detailed in the lawsuit.

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