The Wall Street Journal-20080118-WaMu Is Sued by Appraiser
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WaMu Is Sued by Appraiser
A lawsuit filed last week by a California appraiser against lender Washington Mutual Inc. says the appraiser was blacklisted after she reported that home prices in her area were falling, thus making it harder for the bank to get loans approved. The suit, which also named two appraisal-management companies, comes as WaMu has been facing regulators' scrutiny over possibly making loans based on inflated appraisals.
The appraiser, Jeniffer Wertz, says last May she determined that prices were falling in a neighborhood where she was doing appraisals, so she marked a box in one of her reports that indicated prices in the area were "declining." Marking that box generally forces the lender to reduce the loan amount and to increase the down payment by the borrower, which could place the deal at risk.
Ms. Wertz claims a WaMu sales manager contacted her about the report and instructed her to instead mark the box in her appraisal reports that indicated prices in the area were "stable." When Ms. Wertz refused, she was taken off the bank's preferred appraiser list and hasn't gotten more work, she says.
A spokeswoman for Washington Mutual declined to comment on the litigation.
Jonathan Miller, a New York appraiser, said pressure on appraisers not to check the "declining" box in their reports is widespread and that many appraisers submit to such demands. But "if you do that," he says, "you're not doing an appraisal anymore -- you're a form-filler."
The suit, filed in state court in Sacramento, follows a lawsuit filed last fall by New York Attorney General Andrew Cuomo against a First American Corp. appraisal unit, eAppraiseIT, that claims the company submitted to pressure by WaMu -- not named as a defendant -- to ensure that appraisals were high enough to justify its loans. (First American has denied the charges and has moved to dismiss the suit.)
WaMu has said it is cooperating with investigations by the Office of Thrift Supervision and the Securities and Exchange Commission into whether the company made loans based on inflated appraisals. It has said that after weeks of investigating Mr. Cuomo's allegations, "we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals."
