Inflated home appraisals? Rings a bell
TEXT OF STORY
Bob Moon: Well, we hate to say we told you so, but more than two years ago, Marketplace investigated a problem that looked really scary. It was the prospect of a massive wave of foreclosures, made even worse by inflated home appraisals. In many cases, the loans were allegedly far bigger than the value of the homes.
It was back in June of 2005 when we heard from a leading property appraiser in New York City, Jonathan Miller. He told us lending institutions were colluding to get people loans that they were going to have big trouble paying back.
Jonathan Miller: I think where things will change is if we start seeing banks get into trouble. I’m particularly concerned the federal government is going to be left holding the bag bailing out bad loans.
Hmmmm . . .
Now that that appraisal has proved to be right on the money, two years after we brought you that alarming news, one official in one state is taking action.
New York Attorney General Andrew Cuomo is bringing charges against the nation’s largest savings and loan company, Washington Mutual, and a major real-estate appraisal firm owned by First American Corporation. He says they colluded to inflate the values of homes nationwide, compounding the subprime mortgage crisis. And Cuomo says this is just the tip of the iceberg.
Andrew Cuomo: We believe we need a new emphasis and rigor in enforcing these federal regulations. And if the federal government’s not going to do it, in the case of the state of New York, the attorney general’s office will.
Washington Mutual says it’s suspending its relationship with the appraisal firm in question. First American insists the lawsuit against its subsidiary “has no foundation in fact or law.”
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