From Business Week, a Seattle lawfirm is suing Countrywide and Landsafe claiming they illegally rigged the appraisal process.
Typical of the complaints about appraisers’ bubble-era behavior are those spelled out in a lawsuit filed on Jan. 12 in the U.S. District Court for the Western District of Washington by Carrol and Gregory Clark. The suit, which seeks class-action status, claims that Countrywide Home Loans and its in-house appraisal arm, LandSafe, inflated home valuations during the boom so Countrywide could make more loans and sell them on Wall Street.
The lawsuit claims that when the Clarks refinanced their Seattle home for $350,000 in February 2007, they were required to use the Countrywide affiliate for the appraisal. It says they paid $410, double what LandSafe actually paid an outside appraiser to do the work. The suit further claims that outside appraisers who didn’t come up with high home values were denied future work from the lender.
Countrywide was acquired by Bank of America (BAC) in July 2008. Asked for a response, Bank of America spokeswoman Shirley Norton said, “We have not been served yet, but based on what we have heard about this suit we believe it is without merit.”
A lot of appraisers aren’t happy about the looming changes. In a poll conducted on Jan. 16 by the American Appraisal Institute trade group, 60% of appraisers said the code was unlikely to change the quality of appraisals. The 600 or so survey participants also said the biggest problem in the industry wasn’t pressure from clients, but poorly trained appraisers.
The lawsuit was really filed on behalf of home-owners, who the suit alleges, overpaid for appraisals. However, the lawsuit touches on a couple other issues facing appraisers, such as low appraisal fees and interference from AMC’s. It should be very interesting to see how this suit plays out. And whether it leads to other lawsuits in the future.
Update – January 21
The same law firm is now investigating Wells Fargo and its subsidiary Rels Valuation.