First American and eAppraiseit Move to Dismiss AG’s Suit

Allison Tussey —  April 29, 2009 — 8 Comments

First American Corporation (First American) and First American eAppraiseit (EAI) (together, Defendants) move to dismiss a complaint brought back in late 2007 by New York Attorney General Andrew Cuomo. The Complaint, as previously reported by Mortgage Fraud Blog, alleges that EAI, a subsidiary of First American, in a scheme detailed in numerous e-mails, caved to pressure from Washington Mutual to use a list of preferred “Proven Appraisers” who provided inflated appraisals on homes. The e-mails also show that executives at EAI knew their behavior was illegal, but intentionally broke the law to secure future business with WaMu.

Specifically, the AG alleged that, in the course of its relationship with Wamu, Defendants permitted EAI‘s appraisers to be pressured into changing appraisal values that were too low in order to allow certain loans to proceed to closing. This conduct allegedly compromised EAI‘s independence in providing unbiased valuations, to the detriment of consumers, and amount to deceptive business practices under New York and federal law.

The Defedants moved to dismiss the AG’s complaint on the grounds that it is preempted by federal banking law and regulations, and for failure to state a cause of action  (the “Motion”). The Motion raised the issue of the preemptive effect of federal banking regulations on state law claims that seek to enforce standards of real estate appraiser independence and for fraudulent business practices arising out of the violation of those standards.

Specifically, Defendants moved to dismiss the complaint on the ground that through two comprehensive federal statutes, the Home Owners Loan Act and the Financial Institutions Reform, Recovery and Enforcement Act, Congress broadly empowered the federal Office of Thrift Supervision to promulgate and enforce federal regulations governing all aspects of federal savings and loan activities, including the manner in which appraisals are conducted in connection with mortgage loan transactions. On this basis, Defendants argue that the federal regulations so thoroughly occupy the legislative field as to impliedly preempt the AG’s cause of action for violation of General Business Law § 349.

The Court concluded that federal regulation does not occupy the entire field with respect to real estate appraisal regulation and denied Defendants’ Motion.  The Court also ordered the Defendants to serve an answer to the complaint.

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Allison Tussey

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8 responses to First American and eAppraiseit Move to Dismiss AG’s Suit

  1. Well Ms. Sandy as an underwriter I’ll bet you are very busy as the only appraisals being done for this price are from the bottom feeders, young and no experience. I’ve been in the business over 20 yrs. and seen people come and go and I’m still around. I still get quality work from good Banks and SL’s. They call me and don’t care what the fee is they just want to know what the true value is. In this market putting out a good quality appraisal is very difficult.

  2. DONNA CORRADO May 7, 2009 at 10:48 am

    To the underwriter who states appraisrs if unhappy with the pay should find another position. If there were decent underwriters who hadn’t passed every loan origination package across their desk to closing,because the borrowers could “breathe” we would not be in this mess. Many wore blindfolds and if the borrower could sign his name, the underwriters said “yes” to the loan.
    Push Push Push for number of loans closed for the month was all the lenders cared about. “THE PROFITS”
    It has always been less than minimum wage job with high risks but never
    controled. In your profession you are given the guidelines to follow and unfortunately there were many 100% loans and borrowers never made the first payment. Now who’s responsiblity was it to prove them creditworthy?
    Why should an independant fee appraiser be told what he is to earn. We are not employed. We are self employed and our rights have been taken away. We place our insurance,license and future liabilities on the line everyday when we go out to appraise. We have a right to earn a decent living. REMEMBER… appraisers are the lowest fee paid on the HUD closing statement with the most to lose. We don’t need more gov’t control….. Gov’t and politics has proven to be corrupt. The fish stinks at the head. Barney and friends in DC should all be prosecuted for lying about the condition of FNMA.

  3. I understand what the appraisers are feeling, but if they hadn’t fallen for the ole pressure from the brokers, they wouldn’t be in this fix now..

    Unfortunately, it was the ole “everyone else does it” mentality. Now it is time to pay your dues after the windfall. And, some of the appraisals are still lousy..

    Yep, I am an underwriter..and I would prefer to be “services not required anymore” to “fraud”… does that sound familiar?

    Stop complaining and be glad you have some work, or find another profession.

  4. Well since 5/1 I have turned down 4 appraisals ranging from $175 to $325 for an REO.

  5. I do not see where the HVCC solves anything at all. It simply empowers the robber-baron AMCs.

  6. Loretta LaBianca May 6, 2009 at 2:39 pm

    Talk about restriant of trade. Appraisers are being robbed of their business by large banks that want to control every aspect of the real estate transaction and they are trying to put the mortgage brokers out of business as well. Cuomo has created the “Wal Martization” of the appraisal business and reduced veteran appraisers to working for minimum wage. Where is the Appraisal Institute and other Appraisal organizations? All they want to do is sell classes. With all the expenses appraisers endure it is going to be hard for good appraisers to stay in business for the fees they are offering. In many cases the turn around time is within one day of inspection which is going to reduce the quality of the appraisals that are slammed out to meet very short turn times. I am appalled at the way this country has slowly over the last 2 decades became all big business controlling every aspect of small business. Then the government rewards them on their taxes for sending jobs overseas!!!! The small business person is becoming an endangered species.

  7. Donna Corrado May 6, 2009 at 10:58 am

    Eappraiseit should be prosecuted to the full extent of the law, instead Cuomo rewards the industry by giving the AMC’s more power and now after May 1’s passing of the HVCC, the appraiser has more pressure for less money. The orders state the appraisals are due 8 hrs from inspection for $135 to the appraiser. Where is the rest of the borrowers $400 he paid the lender going to? oh yes! a portal for transfering appraisals that are ripped apart and the info sucked out and used for more self gain and illegal use paid with the consumers money… Did anyone mention AG sits on the Board of Directors of the biggest AMC while making all these new laws?? I aM SICK OF “FNMA” RULES.
    Their stock is sitting at 72cents a share. They completely failed as a gov’t org and caused the housing collapse and now they are in charge again.More gov’t control. The HVCC rules breed more greed and are a perfect law suit in favor of the appraisers. Look up the definition of “restraint of trade”…
    Consumers should look at the HUD closing statement and see that the appraisal charges are not what the appraiser is being paid but what a third party usually bank owned or title co owned is stealing.
    We as appraisers are not the criminals,,,, Many appraisers are refusing AMC work…… me for example.
    No one is touching my appraisals.

  8. Francois K. Gregoire April 30, 2009 at 6:19 pm

    What a display of chutzpa on the part of First American and eAppraiseit!!

    It would be nice to see their reasoning as to how an appraisal management company is regulated and/or controlled under FIRREA. If true, there are plenty of state regulatory agencies for appraisers would like a crack at them

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