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NY, FirstAM & WaMu article
- Thread starter Tawfik Ahdab
- Start date
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Tawfik Ahdab
Senior Member
- Joined
- Feb 19, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Oregon
Thanks Joyce for the link.
Page 8 of the indictment:
II. Appraisal Management Companies Create
the Appearance of Appraiser Independence
22. In response to these rules and the threat of stricter federal enforcement, in Spring
2006, WaMu attempted to insulate itself by hiring two Appraisal Management Companies
(“AMCs”) – eAppraiseIT and its top competitor Lender’s Service, Inc. (“LSI”) – to oversee the
appraisal process. These companies provide the appearance of a structural buffer between the
banks and the appraisers that eliminates potential pressure or conflicts of interest. In theory, an
AMC selects appraisers independently, serves as the appraisers’ sole contact, and communicates
the unbiased results to the lending institution. In this way, structurally, a lending institution
would be much less able to improperly influence an appraisal.
23. eAppraiseIT publicly claims on its website that it provides just such a firewall
Page 9 of 31
between lenders and appraisers, and that “customers can be assured that Uniform Standards of
Professional Appraisal Practice (USPAP) and Financial Institutions Reform Recovery and
Enforcement Act (FIRREA) guidelines are followed and that each appraisal is audited for
compliance.”
III. First American and eAppraiseIT Violate Appraiser Independence
Requirements by Permitting WaMu’s Loan Origination Staff
To Select Appraisers Who Provide Higher Appraised Values
24. Despite their claims of independence from their lender clients, First American and
eAppraiseIT violate federal and state independence requirements with regard to appraisals
performed for WaMu, and in doing so deceive borrowers and investors who rely on their
proclaimed independence.
Page 8 of the indictment:
II. Appraisal Management Companies Create
the Appearance of Appraiser Independence
22. In response to these rules and the threat of stricter federal enforcement, in Spring
2006, WaMu attempted to insulate itself by hiring two Appraisal Management Companies
(“AMCs”) – eAppraiseIT and its top competitor Lender’s Service, Inc. (“LSI”) – to oversee the
appraisal process. These companies provide the appearance of a structural buffer between the
banks and the appraisers that eliminates potential pressure or conflicts of interest. In theory, an
AMC selects appraisers independently, serves as the appraisers’ sole contact, and communicates
the unbiased results to the lending institution. In this way, structurally, a lending institution
would be much less able to improperly influence an appraisal.
23. eAppraiseIT publicly claims on its website that it provides just such a firewall
Page 9 of 31
between lenders and appraisers, and that “customers can be assured that Uniform Standards of
Professional Appraisal Practice (USPAP) and Financial Institutions Reform Recovery and
Enforcement Act (FIRREA) guidelines are followed and that each appraisal is audited for
compliance.”
III. First American and eAppraiseIT Violate Appraiser Independence
Requirements by Permitting WaMu’s Loan Origination Staff
To Select Appraisers Who Provide Higher Appraised Values
24. Despite their claims of independence from their lender clients, First American and
eAppraiseIT violate federal and state independence requirements with regard to appraisals
performed for WaMu, and in doing so deceive borrowers and investors who rely on their
proclaimed independence.
Pamela Crowley (Florida)
Elite Member
- Joined
- Jan 13, 2002
- Professional Status
- Retired Appraiser
- State
- Florida
The orgy was infected with AIDS. The infected from this orgy are involved in just about every major lender, AMC, and others.
How about that 'third party software company'?????
How about that 'third party software company'?????
KD247
Senior Member
- Joined
- Jan 24, 2002
- Professional Status
- Certified Residential Appraiser
- State
- California
First American Home Appraisal Unit Sued by New York
First American Home Appraisal Unit Sued by New York
2007-11-01 12:27 (New York)
By Sharon L. Crenson and Karen Freifeld
Nov. 1 (Bloomberg) -- First American Corp., the largest U.S.
title insurer, was sued by New York Attorney General Andrew Cuomo
for allegedly inflating home values under pressure from
Washington Mutual Inc.
First American's eAppraiseit LLC unit gave in to demands for
higher appraisals to secure more of Washington Mutual's business,
Cuomo said at a news conference in Manhattan today. A First
American spokesman disputed Cuomo's allegation. The appraiser did
262,000 valuations over the past 18 months for Washington Mutual,
the biggest U.S. thrift, and earned $50 million, Cuomo said.
``The independence of the appraiser is essential to
maintaining the integrity of the mortgage industry,'' Cuomo said.
``First American and eAppraiseIT violated that independence when
Washington Mutual strong-armed them into a system designed to rip
off homeowners and investors alike.''
States including California, Colorado, Ohio, and Connecticut
have been investigating the mortgage industry as foreclosures rise
nationwide. A borrower who gets a home loan based on an inflated
appraisal and falls behind on payments would have difficulty
selling or refinancing for enough to pay off the mortgage.
First American and Poway, California-based eAppraiseIT
``signed over their independence to Washington Mutual,'' said Eric
Corngold, executive deputy attorney general for economic justice.
Cuomo said Seattle-based Washington Mutual is not being sued
because of questions over federal jurisdiction.
`Vehemently Disagree'
``We vehemently disagree with his characterization of the
facts,'' Kenneth DeGiorgio, First American's general counsel, said
in a conference call with analysts. ``We're confident that once
we've had the opportunity to set forth our response before an
impartial arbiter, our activities will be found to be
appropriate.'' Washington Mutual spokeswoman Libby Hutchinson
didn't return calls seeking comment.
Washington Mutual fell $2.06, or 7.4 percent to $25.82 in New
York Stock Exchange composite trading at 12:22 p.m. First American
gained, 94 cents, or 3 percent, to $31.04.
Cuomo conducted a nine-month investigation and the evidence
against First American is ``damning,'' he said. It includes e-
mails between executives at the appraisal company and Washington
Mutual that show eAppraiseIT ``willingly violated'' state and
federal regulations that call for independent home appraisals.
eAppraiseIT President Anthony Merlo, Jr. said in an interview
in May that Cuomo had asked the company for information on work
the company had done in New York.
`Good Thing'
``It's a very good thing, what the attorney general is
doing,'' Merlo said at the time. Cuomo's office was focused on
``who's exerting the pressure'' on appraisers, he said.
The First American unit does about 50,000 valuations a month
nationwide, Merlo said then.
In March, Cuomo, 49, said he was investigating the subprime
mortgage market in response to the surge in mortgage
delinquencies. In May, he subpoenaed real estate appraisers
Mitchell, Maxwell & Jackson Inc. and eAppraiseIT, as well as the
broker Manhattan Mortgage Co.
Within a month, Cuomo subpoenaed records from Vanderbilt
Appraisal Co. LLC, which is owned Terra Holdings, a real estate
company whose principals include New York developers Arthur and
William Lie Zeckendorf.
In September, credit rating companies Standard & Poor's and
Fitch Ratings said they were subpoenaed by Cuomo. Fitch said its
subpoena demanded information on residential mortgage-backed
securities and collateralized-debt obligations, which hold
mortgage-backed securities.
Cuomo, who took office in January, has also broadened an
investigation begun by his predecessor, Eliot Spitzer, into the
$85 billion student loan industry. The probe first focused on
conflicts of interest between lenders and schools. A dozen lenders
and 26 colleges and universities reached agreements with Cuomo to
cut financial ties and abide by a code of conduct.
--With reporting by Bob Ivry in New York. Editor: Mirabella
(rau)
First American Home Appraisal Unit Sued by New York
2007-11-01 12:27 (New York)
By Sharon L. Crenson and Karen Freifeld
Nov. 1 (Bloomberg) -- First American Corp., the largest U.S.
title insurer, was sued by New York Attorney General Andrew Cuomo
for allegedly inflating home values under pressure from
Washington Mutual Inc.
First American's eAppraiseit LLC unit gave in to demands for
higher appraisals to secure more of Washington Mutual's business,
Cuomo said at a news conference in Manhattan today. A First
American spokesman disputed Cuomo's allegation. The appraiser did
262,000 valuations over the past 18 months for Washington Mutual,
the biggest U.S. thrift, and earned $50 million, Cuomo said.
``The independence of the appraiser is essential to
maintaining the integrity of the mortgage industry,'' Cuomo said.
``First American and eAppraiseIT violated that independence when
Washington Mutual strong-armed them into a system designed to rip
off homeowners and investors alike.''
States including California, Colorado, Ohio, and Connecticut
have been investigating the mortgage industry as foreclosures rise
nationwide. A borrower who gets a home loan based on an inflated
appraisal and falls behind on payments would have difficulty
selling or refinancing for enough to pay off the mortgage.
First American and Poway, California-based eAppraiseIT
``signed over their independence to Washington Mutual,'' said Eric
Corngold, executive deputy attorney general for economic justice.
Cuomo said Seattle-based Washington Mutual is not being sued
because of questions over federal jurisdiction.
`Vehemently Disagree'
``We vehemently disagree with his characterization of the
facts,'' Kenneth DeGiorgio, First American's general counsel, said
in a conference call with analysts. ``We're confident that once
we've had the opportunity to set forth our response before an
impartial arbiter, our activities will be found to be
appropriate.'' Washington Mutual spokeswoman Libby Hutchinson
didn't return calls seeking comment.
Washington Mutual fell $2.06, or 7.4 percent to $25.82 in New
York Stock Exchange composite trading at 12:22 p.m. First American
gained, 94 cents, or 3 percent, to $31.04.
Cuomo conducted a nine-month investigation and the evidence
against First American is ``damning,'' he said. It includes e-
mails between executives at the appraisal company and Washington
Mutual that show eAppraiseIT ``willingly violated'' state and
federal regulations that call for independent home appraisals.
eAppraiseIT President Anthony Merlo, Jr. said in an interview
in May that Cuomo had asked the company for information on work
the company had done in New York.
`Good Thing'
``It's a very good thing, what the attorney general is
doing,'' Merlo said at the time. Cuomo's office was focused on
``who's exerting the pressure'' on appraisers, he said.
The First American unit does about 50,000 valuations a month
nationwide, Merlo said then.
In March, Cuomo, 49, said he was investigating the subprime
mortgage market in response to the surge in mortgage
delinquencies. In May, he subpoenaed real estate appraisers
Mitchell, Maxwell & Jackson Inc. and eAppraiseIT, as well as the
broker Manhattan Mortgage Co.
Within a month, Cuomo subpoenaed records from Vanderbilt
Appraisal Co. LLC, which is owned Terra Holdings, a real estate
company whose principals include New York developers Arthur and
William Lie Zeckendorf.
In September, credit rating companies Standard & Poor's and
Fitch Ratings said they were subpoenaed by Cuomo. Fitch said its
subpoena demanded information on residential mortgage-backed
securities and collateralized-debt obligations, which hold
mortgage-backed securities.
Cuomo, who took office in January, has also broadened an
investigation begun by his predecessor, Eliot Spitzer, into the
$85 billion student loan industry. The probe first focused on
conflicts of interest between lenders and schools. A dozen lenders
and 26 colleges and universities reached agreements with Cuomo to
cut financial ties and abide by a code of conduct.
--With reporting by Bob Ivry in New York. Editor: Mirabella
(rau)
deturner
Senior Member
- Joined
- Apr 2, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Kansas
I can't see how appraiser independence is practiced in this scenario...........
I have always had a bad feeling about this set up (even when doing mostly RE sales).
I hope they do get that mess straightened out (now that Beazer Homes has been put on the spot).
DaveT in NC
Tawfik Ahdab
Senior Member
- Joined
- Feb 19, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Oregon
Page 12 of the indictment
ROV = reconsideration of value
34. During this period, First American was seeking additional business from WaMu
in other areas. But WaMu expressly conditioned giving any future business to First American on
success with eAppraiseIT. By email dated September 27, 2006, a First American senior
executive advised other senior executives at First American and eAppraiseIT about a
conversation he had with the President of WaMu Mortgage about long-term business prospects.
The First American executive explained that:
[WaMu] and I discussed our long-term relationship including the
money we have on deposit there and our other current business
relationships. I told him we would like to expand those relationships.
And in exact terms, we would like one half of their flood business,
which they currently give 100% to [Corporation A] and their tax
business is divided 3 ways among [3 corporations] and that we would
like to take [Corporation A’s] tax business.
According to the First American executive, WaMu responded as follows:
He said that if the appraisal issues are resolved and things are working
well he would welcome conversations about expanding our
relationship including tax and flood.
Page 13 of 31
Thus, First American knew that WaMu would provide it with new business only if the “appraisal
issues” – including WaMu’s complaints that eAppraiseIT’s appraisers did not provide high
enough values – were “resolved.”
35. By December 2, 2006, eAppraiseIT noted internally that “. . . we know [WaMu
is] going to complain about the excessive number of low values because the majority of orders
are not going to [WaMu’s] preferred appraisers.”
36. On December 18, 2006, one eAppraiseIT executive told others that WaMu had
advised him that its criticism was based on the fact that “values are coming in lower with EA
[eAppraiseIT]” than with LSI, the competitor appraisal management company that WaMu had
also retained to provide appraisals. According to this executive, WaMu maintained that “They
also see more Wamu preferred appraisers doing work for LSI and they think that is why they
aren’t having as many value issues with them. . . . The [WaMu] managers indicated that if the
loan consultants had a choice they would prefer to use LSI over eAppraiseIT because they feel
they will have less problem with the values.”
B. Winter 2007: First American and eAppraiseIT Agree to “Roll Over
and Just Do It” and Accept WaMu’s Corrupt Proven Appraiser List
37. In February 2007, WaMu directed eAppraiseIT to stop using its usual panels of
staff and fee appraisers to perform WaMu appraisals. Instead, WaMu’s loan origination staff
demanded that eAppraiseIT use a Proven Panel of appraisers selected by the loan origination
staff, who were chosen because they provided high values.
38. By email dated February 22, 2007, eAppraiseIT’s President explained to senior
executives at First American WaMu’s motives for demanding the Proven Panel:
We had a joint call with Wamu and LSI today. The attached document
Page 14 of 31
outlines the new appraiser assigning process. In short, we will now
assign all Wamu’s work to Wamu’s “Proven Appraisers” . . . . We will
pay their appraisers whatever they demand. Performance ratings to
retain position as a Wamu Proven Appraiser will be based on how
many come in on value, negating a need for an ROV. (Emphasis
added).
39. eAppraiseIT’s senior management was well aware of the threats to appraiser
independence inherent in allowing WaMu’s loan production staff to select the appraisers on the
Proven Panel based on whether the appraiser “came in on value,” and raised these concerns with
First American’s senior management. eAppraiseIT executives warned of their “concern
regarding the proven list” and “concerns about over-valued properties.”
40. These concerns were warranted. eAppraiseIT knew that WaMu’s Proven
Appraiser List would be composed of appraisers who had been hand-picked by the loan
origination staff because they brought in high appraisal values. Indeed, when eAppraiseIT
received email requests to add particular appraisers to the panel, the email chains often showed
that the requests came directly from WaMu’s loan origination staff. Further, a WaMu Vice
President in the Appraisal Oversight group explained, in an email to eAppraiseIT about an ROV
for a “low value,” that “This is an example of the issue that has caused sales pushing for a
‘proven appraiser’ process.”
ROV = reconsideration of value
34. During this period, First American was seeking additional business from WaMu
in other areas. But WaMu expressly conditioned giving any future business to First American on
success with eAppraiseIT. By email dated September 27, 2006, a First American senior
executive advised other senior executives at First American and eAppraiseIT about a
conversation he had with the President of WaMu Mortgage about long-term business prospects.
The First American executive explained that:
[WaMu] and I discussed our long-term relationship including the
money we have on deposit there and our other current business
relationships. I told him we would like to expand those relationships.
And in exact terms, we would like one half of their flood business,
which they currently give 100% to [Corporation A] and their tax
business is divided 3 ways among [3 corporations] and that we would
like to take [Corporation A’s] tax business.
According to the First American executive, WaMu responded as follows:
He said that if the appraisal issues are resolved and things are working
well he would welcome conversations about expanding our
relationship including tax and flood.
Page 13 of 31
Thus, First American knew that WaMu would provide it with new business only if the “appraisal
issues” – including WaMu’s complaints that eAppraiseIT’s appraisers did not provide high
enough values – were “resolved.”
35. By December 2, 2006, eAppraiseIT noted internally that “. . . we know [WaMu
is] going to complain about the excessive number of low values because the majority of orders
are not going to [WaMu’s] preferred appraisers.”
36. On December 18, 2006, one eAppraiseIT executive told others that WaMu had
advised him that its criticism was based on the fact that “values are coming in lower with EA
[eAppraiseIT]” than with LSI, the competitor appraisal management company that WaMu had
also retained to provide appraisals. According to this executive, WaMu maintained that “They
also see more Wamu preferred appraisers doing work for LSI and they think that is why they
aren’t having as many value issues with them. . . . The [WaMu] managers indicated that if the
loan consultants had a choice they would prefer to use LSI over eAppraiseIT because they feel
they will have less problem with the values.”
B. Winter 2007: First American and eAppraiseIT Agree to “Roll Over
and Just Do It” and Accept WaMu’s Corrupt Proven Appraiser List
37. In February 2007, WaMu directed eAppraiseIT to stop using its usual panels of
staff and fee appraisers to perform WaMu appraisals. Instead, WaMu’s loan origination staff
demanded that eAppraiseIT use a Proven Panel of appraisers selected by the loan origination
staff, who were chosen because they provided high values.
38. By email dated February 22, 2007, eAppraiseIT’s President explained to senior
executives at First American WaMu’s motives for demanding the Proven Panel:
We had a joint call with Wamu and LSI today. The attached document
Page 14 of 31
outlines the new appraiser assigning process. In short, we will now
assign all Wamu’s work to Wamu’s “Proven Appraisers” . . . . We will
pay their appraisers whatever they demand. Performance ratings to
retain position as a Wamu Proven Appraiser will be based on how
many come in on value, negating a need for an ROV. (Emphasis
added).
39. eAppraiseIT’s senior management was well aware of the threats to appraiser
independence inherent in allowing WaMu’s loan production staff to select the appraisers on the
Proven Panel based on whether the appraiser “came in on value,” and raised these concerns with
First American’s senior management. eAppraiseIT executives warned of their “concern
regarding the proven list” and “concerns about over-valued properties.”
40. These concerns were warranted. eAppraiseIT knew that WaMu’s Proven
Appraiser List would be composed of appraisers who had been hand-picked by the loan
origination staff because they brought in high appraisal values. Indeed, when eAppraiseIT
received email requests to add particular appraisers to the panel, the email chains often showed
that the requests came directly from WaMu’s loan origination staff. Further, a WaMu Vice
President in the Appraisal Oversight group explained, in an email to eAppraiseIT about an ROV
for a “low value,” that “This is an example of the issue that has caused sales pushing for a
‘proven appraiser’ process.”
JCONNOR3
Sophomore Member
- Joined
- Apr 6, 2007
- Professional Status
- Certified General Appraiser
- State
- Florida
Bet your a$
Every list just opened up as of about noon today. Happy hunting guys and gals.
BY the way there is a lot more in the hopper on this. I would not want to show up on ANY preferred lists.
Every list just opened up as of about noon today. Happy hunting guys and gals.
BY the way there is a lot more in the hopper on this. I would not want to show up on ANY preferred lists.
Pamela Crowley (Florida)
Elite Member
- Joined
- Jan 13, 2002
- Professional Status
- Retired Appraiser
- State
- Florida
E's 'damage control', (some due to my outing of some of their SOPs) is to throw WAMU under the bus?
Yeah, right.... wamu was their ony client they bent the 'rules' for???
Yeah, right.... wamu was their ony client they bent the 'rules' for???
deturner
Senior Member
- Joined
- Apr 2, 2003
- Professional Status
- Certified Residential Appraiser
- State
- Kansas
So, what do others think will become of this?
Will AMC's be pushed out because of the "Make the appraisals work if you want more of our business"?
Will there be yet another middle man taking a cut of the fee in order to cut down on the "appraisal pressure"?
Will "preferred appraiser lists" become a thing of the past?
I have no problem with an "approved appraiser list" but it should be allowed to have as many appraisers that apply for it and meet the guidelines (outside of "do you hit the number"). Then the list should be rotated. I hear of one bank implementing this as I type. Everything is done electronically and the LO doesn't know who the appraiser is until the report is delivered.
DaveT in NC
Will AMC's be pushed out because of the "Make the appraisals work if you want more of our business"?
Will there be yet another middle man taking a cut of the fee in order to cut down on the "appraisal pressure"?
Will "preferred appraiser lists" become a thing of the past?
I have no problem with an "approved appraiser list" but it should be allowed to have as many appraisers that apply for it and meet the guidelines (outside of "do you hit the number"). Then the list should be rotated. I hear of one bank implementing this as I type. Everything is done electronically and the LO doesn't know who the appraiser is until the report is delivered.
DaveT in NC
- Status