New York state's attorney general said Thursday that his office is suing First American Corp. for allegedly "colluding" with mortgage lender Washington Mutual to inflate the appraisal value of homes.
First American's eAppraiseIT subsidiary succumbed to pressure from Washington Mutual, also known as WaMu, to use a list of preferred "Proven Appraisers" who provided inflated appraisals, according to Andrew Cuomo, New York's top law-enforcement official.
Emails show that executives at eAppraiseIT knew their behavior was illegal but went ahead in order to secure future business with WaMu, Cuomo said in a statement. Representatives at Santa Ana, Calif.-based First American didn't immediately respond to phone and email requests for comment.
"The independence of the appraiser is essential to maintaining the integrity of the mortgage industry," Cuomo said.
However, First American and eAppraiseIT "violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike," Cuomo alleged.
Does this strike you as insane? Appraisals are there to insure that there is adequate collateral for the lender in case the loan goes bad. Washington Mutual is saying that they want to be defrauded!
That's like a bank asking its rent-a-cop firm to send old, feeble security guards who will fall asleep on the job. Not enough bank robberies here! Let's do something to encourage more!
Of course, it makes sense when you realize who got rich and who's left holding the bag. WaMu management got filthy rich in 2000-2006 from bonuses and stock options on inflated earnings. They don't care when all those loans go bad. The shareholders are left holding the bag. Sound familiar, Mozilo?