American Home Mortgage Corp dba American Brokers Conduit brought a civil action in the Supreme Court for New York County against Allegiance Mortgage Corporation, Act Appraisal, Inc. and Karen Kertz (Please see update regarding professional identity theft suffered by Karen Kertz and dismissal of Act Appraisal, Inc. and Karen Kertz as defendants.) “to recover damages that American Home . . . suffered as a result of the purchase of a mortgage loan imbued with fraud, including a fraudulent appraisal.”

According to the complaint, on November 20, 2003, American Home funded a mortgage loan submitted by Allegiance and secured by property at 742 North Lockwood Avenue, Chicago, Illinois. The loan was funded in reliance on an appraisal performed by Kertz on behalf of Act Appraisal that appraised the property as having a market value of $289,500. American Home sold the loan to Countrywide. The loan went into default and was foreclosed.

According to the complaint, following default, Countrywide discovered ‘serious deficiencies’ concerning the appraised value of the property, occupancy status and undisclosed liabilities and demanded that American Home repurchase the loan. American Home’s review found the true market value of the property at the time the loan closed to be approximately $65,000, according to the complaint and found that the property appraised by Act Appraisal and Kertz and represented in the appraisal was not the property securing the loan American Home funded.

The complaint includes causes of action for breach of contract (as to Allegiance), fraudulent appraisal (Act Appraisal and Kertz) and negligent misrepresentation (Act Appraisal and Kertz). The action was removed to the United States District Court for the Southern District of New York on September 9, 2005.