* eAppraiseIT accused of inflating home appraisals
* Agrees to pay $7.8 million to end lawsuit
* eAppraiseIT now part of CoreLogic Inc
* NY AG Schneiderman took case to trial
* Schneiderman to bring new mortgage-related action soon
By Karen Freifeld
NEW YORK, Sept 27 A company accused of inflating
home appraisals under pressure from Washington Mutual Inc before
the housing crisis agreed to pay $7.8 million on Thursday to
settle with the New York attorney general.
EAppraiseIT, a unit of CoreLogic Inc, resolved the
charges with New York Attorney General Eric Schneiderman while
The case, filed in New York state court in 2007, is one of
the few related to the housing meltdown that the government has
brought to trial. The trial was in recess when the settlement
Schneiderman is co-chair of the federal mortgage fraud task
force formed in January to probe actions that led to the
financial crisis. He has said he plans to take legal action
against other targets soon.
Homes that were appraised above their value, allowing
mortgage companies to issue bigger mortgages, are among the
causes cited by experts for the housing bubble and subsequent
EAppraiseIT, a major appraisal management company during the
housing boom, was accused of colluding with Washington Mutual,
which had been of the largest U.S. mortgage lenders until the
housing market collapsed.
"Coercion of appraisers to inflate home values and the
erosion of appraisal independence directly contributed to the
housing crisis," Schneiderman said in a statement. "By giving in
to lender pressure, these corporations violated a principle that
is vital to restoring and maintaining a healthy housing market."
WaMu failed in September 2008, and JPMorgan Chase and Co
acquired its lending business. The bank is not a
defendant in the case.
A DAMAGING EMAIL
EAppraiseIT let bank loan officers determine the pool of
appraisers to be used, based on whether the appraisers were more
likely to come through with the values needed to close on the
loan, according to court papers.
The company handled more than 260,000 appraisals around the
country for Washington Mutual. In 2006 and 2007, it conducted
about 10,000 appraisals on New York properties for the lender.
The case, which involved only New York appraisals, could
have ended with penalties of up to $9.5 million if the judge
reached a verdict, one source said.
Alyson Austin, a CoreLogic spokeswoman, said eAppraiseIT is
part of CoreLogic Valuation Services, a business the company is
shutting this month. She declined immediate comment on the
New York state Supreme Court Justice Charles Ramos had been
hearing the case sporadically without a jury.
One appraiser testified he stopped getting work from
eAppraiseIT in April 2007 because he failed to pump up
valuations. He said he was told his name was not on a list of
appraisers provided by Washington Mutual's sales office.
Evidence included a 2007 email from a former Washington
Mutual employee that said eAppraiseIT's appraiser list had been
"But instead of keeping good appraisers, they went for the
BADddd ones," the email said.
An expert witness testified at least 60 percent of the
appraised properties she analyzed had inflated values.
Anthony Merlo, former chief executive officer of
eAppraiseIT, had been scheduled to testify in the case.
EAppraiseIT was the appraisal management unit of real estate
services company First American Corp, which is also a
defendant in the lawsuit.
First American later split into two companies, First
American Financial Corp and CoreLogic Inc.
The case is People of the State of New York v. First
American Corp., New York state Supreme Court, New York County,