New York Attorney General Andrew Cuomo issued a subpoena to First American Corp.'s real estate appraisal unit in his investigation of whether mortgage brokers pressured appraisers to inflate property values.
eAppraiseIT LLC, which values up to 15,000 homes a year in New York, was asked for information about appraisals performed throughout the state, its president, Anthony Merlo Jr., said in an interview Tuesday.
Mr. Cuomo, who took office in January, is investigating New York real estate practices after focusing on the $85 billion student loan industry. He has issued subpoenas to the appraiser Mitchell, Maxwell & Jackson Inc. and the brokerage Manhattan Mortgage Co., the companies said on May 18.
"It's a very good thing, what the attorney general is doing," Mr. Merlo said.
Mr. Cuomo's office was focused on "who's exerting the pressure" on appraisers, he said.
Rising foreclosures in the United States have spurred state officials to scrutinize firms from mortgage brokers to 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 subprime loans was the most since 2002, according to the Mortgage Bankers Association.
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 survey 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, of Poway, Calif., does about 50,000 valuations a month nationwide, Mr. Merlo said.
The company is cooperating with the attorney general's request for information, he said, and "our preliminary meeting and responses were very favorable."
Mr. Cuomo's office is also 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, eAppraiseIT's chief marketing officer.
Those requests are not improper provided they come with evidence that the valuation was incorrect, such as comparable home sales that an appraiser missed, Ms. McCann said.
The attorney general's office also is seeking information on how appraisal orders are placed.
First American provides title insurance, closing services, credit reports, and home warranties. The Santa Ana, Calif., company has a market value of $5.1 billion, and its stock is up 30% this year.
Mr. Cuomo, the former head of the Department of Housing and Urban Development, in 2004 joined the advisory board of Amco, a Mayfield Heights, Ohio, company that orders appraisals on behalf of lenders.
Mr. Cuomo is no longer involved with Amco.
Mr. Cuomo's spokesman, Jeffrey Lerner, confirmed the subpoena was sent to eAppraiseIT but would not comment further. Mr. Lerner confirmed last week that subpoenas had also been sent to Mitchell Maxwell and to Manhattan Mortgage. In March, Mr. Cuomo said at a press conference that his office was investigating subprime lenders.
Y. David Scharf, a lawyer at Morrison Cohen LLP of New York, who is representing Mitchell Maxwell, said last week that his client had been told it was not a target of the investigation.
