New York seeks data on appraisals
The real estate appraisal unit of First American Corp. has been subpoenaed as part of a New York state investigation into whether mortgage brokers pressure appraisers to inflate property values.
EAppraiseIT, which values up to 15,000 homes a year in New York, was asked for information about appraisals performed in the state, said Anthony Merlo Jr., president of the Poway, Calif.-based unit.
The state attorney general’s office also has issued subpoenas to appraiser Mitchell, Maxwell & Jackson Inc. and broker Manhattan Mortgage Co.
“It’s a very good thing, what the attorney general is doing,” Merlo said. New York Atty. Gen. Andrew Cuomo’s office is focused on “who’s exerting the pressure” on appraisers, Merlo said. First American is not a target of the probe, the company said.
Rising foreclosures in the U.S. have spurred state officials to scrutinize firms including mortgage brokers and investment banks. The percentage of homes entering foreclosure hit an all-time high in the fourth quarter and the proportion of borrowers with poor or limited credit who were behind in payments on sub-prime loans was the most since 2002, according to Mortgage Bankers Assn. in Washington.
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.
In a study last year by October Research Corp. of Richfield, Ohio, 90% of appraisers said they felt influenced to write bogus appraisals. Four years ago, that number was 55%. Seventy-one percent said mortgage brokers asked them to do it.
EAppraiseIT performs about 50,000 valuations a month nationwide, Merlo said, adding that the company was cooperating with New York’s request for information. “Our preliminary meeting and responses were very favorable.”
Cuomo’s office also is seeking information on appraisal rebuttals, in which consumers, loan officers or real estate agents try to get the stated values of homes raised, said DeAnna McCann, chief marketing officer at EAppraiseIT.
Those requests aren’t improper provided they come with evidence that the valuation was incorrect, such as comparable home sales that an appraiser missed, McCann said.
Santa Ana-based First American is one of the largest real estate services companies, with a market value of $5.1 billion. It provides title insurance, closing services, credit reports and home warranties. Its shares rose 57 cents Tuesday to $52.73.
Cuomo spokesman Jeffrey Lerner confirmed the subpoena was sent to EAppraiseIT, but declined to comment further.
