ABC News: New York AG lawsuit documents WaMu appraisal scheme

November 2, 2007

Washington Mutual, a Seattle bank that’s a mid-sized player in Cleveland’s subprime foreclosure drama, is being accused by New York State Attorney General Andrew Cuomo of pressuring a major title insurance company and its appraisal arm to collaborate in a systematic over-appraisal scheme.

From ABC News:

New York State Attorney General Andrew Cuomo’s office charged today in a civil lawsuit that the nation’s largest mortgage and property services corporation, its home appraisal subsidiary and the nation’s largest savings and loan giant conspired to inflate the value of home appraisals, earning higher profits for the bank but leaving homeowners holding potentially risky debt loads.

And the attorney general says his office has the e-mails to prove it.

According to civil court papers filed in New York City, at least 50 e-mails between executives from the mortgage and property services conglomerate, First American Corporation, its wholly owned subsidiary, eAppraiseIT, and Washington Mutual document a “raise the value” scheme…

To carry out the scheme, Washington Mutual allegedly asked that eAppraiseIT — which performs about 50,000 appraisals a month nationally — to use a “preferred list” of independent appraisers rather than appraisers from its own staff of more than 12,500 who, according to the court papers, were not bringing in the property values that Washington Mutual was seeking…

While profitable for Washington Mutual, the loans, especially in a declining housing market, put consumers at risk of being “upside down” on their home loans, the AG’s office said. In that situation, should they attempt to sell or refinance their property, they might owe more in loans than the property is actually worth.

“The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market. By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion,” Cuomo said.

Washington Mutual and two subsidiaries, WM Specialty Mortgage and Long Beach Mortgage, have recorded a total of 476 sheriff’s deeds (completed foreclosures) in Cuyahoga County since the beginning of 2005. 216 of them have been filed in the last ten months.

(c/p CCD)

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Two down, thousands to go (or, Eloise Anderson’s amazing summer)

October 28, 2007

PD this morning:

A Solon builder who has been tied to mortgage fraud has agreed to get out of the construction business as part of his punishment.

Edward Emery Jr. pleaded guilty Thursday to submitting a false loan application for a woman who bought a $490,000 home on Sedge Circle in Solon that he built. Emery also admitted to similar schemes involving 37 homes that he built in Solon and Glenwillow.

Eloise Anderson of Richmond Heights pleaded guilty to using bogus job and income information to buy the Solon house, two houses in Cleveland and another house in Pepper Pike — closing more than $1.3 million in deals over a five-month span in 2005.

Emery was not connected to Anderson’s other homes, Assistant Prosecutor Michael Jackson said. A title company owner, a mortgage broker and two officials from another mortgage company also face charges in the case.

Anderson, a 60-year-old postal clerk, was passed off as a postal inspector earning twice her $55,000 salary.

She planned to quickly dispose of the homes under rent-to-own deals, Jackson said. Solon police broke the case when neighbors on Sedge Circle complained that the tenants were not keeping up the property.

Here’s the indictment, courtesy of the excellent Mortgage Fraud Blog.

So who lent Eloise Anderson all that money?

The First National of Arizona and Meritage loans were actually provided by Mortgage Electronic Registration Systems, Inc., which would have gotten the applications from the local mortgage broker(s) working with Anderson, signed up the two lenders, and then peddled the paper to Deutsche Bank.

Anderson got all of these mortgages approved between the beginning of May and the end of September, 2005!

None of the lenders listed above are implicated in Anderson and Co.’s fraud — in fact, they’re mostly listed in the indictment as victims. But think about it: She faked her income, faked her credit, applied to borrow a million and a half dollars in five separate steps over a five-month period, from four different subprime lenders, and they all bought it.

Maybe they were all just too busy to notice.

Or maybe they liked what they saw.