NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a $7.8 million settlement on Friday with eAppraiseIT and its parent corporation, First American Corporation, for allegedly colluding with Washington Mutual to inflate the value of homes.
The settlement with CoreLogic Inc., a successor-in-interest to subsidiary eAppraiseIT, resolved allegations that the corporation was in violation of appraiser independence laws. Such laws are meant to regulate the conduct of real estate appraisers.
CoreLogic Inc. was formerly known as the First American Corporation and CoreLogic Valuation Services.
"Coercion of appraisers to inflate home values and the erosion of appraisal independence directly contributed to the housing crisis," Schneiderman said. "By giving in to lender pressure, these corporations violated a principle that is vital to restoring and maintaining a healthy housing market."
Schneiderman's office initially filed a complaint against First American and eAppraiseIT, a company that performed more than 260,000 appraisals nationally for Washington Mutual Inc. WaMu allegedly pressured eAppraiseIT to let WaMu's loan officers select property appraisers for mortgages it originated, in violation of federal law, state law and the Uniform Standards of Professional Appraisal Practice.
The practice resulted in inflated property valuations that allowed WaMu to originate more mortgages than would have been possible if appraisals were performed by completely independent appraisers, Schneiderman says.
Between early 2006 and late 2007, eAppraiseIT conducted approximately 10,000 appraisals for WaMu in the state of New York.
First American tried to have the case dismissed, arguing that New York's action was preempted by federal law, a claim that the New York Court of Appeals rejected. The court found that federal law did not preempt Schneiderman's claims for deceptive and fraudulent appraisal practices. First American's petition to have the U.S. Supreme Court hear the case was denied.
In June, the case proceeded to trial in New York Supreme Court.
Under the terms of the settlement, the defendants must pay $4 million in civil penalties and $3.8 million in fees, costs and disbursements incurred during the protracted litigation. Additionally, the defendants, who no longer work in the appraisal industry, agreed to comply with applicable state and federal appraisal laws if they later rejoin the appraisal business in the future.