Three states are going after mortgage companies and originators who they claim are responsible for fraud by residential real estate appraisers.
Lawsuits have been filed in four Ohio counties against 10 mortgage companies by Ohio Attorney General Marc Dann, according to an announcement Thursday. The state seeks judgments declaring the companies are in violation of the Consumer Sales Practices Act and permanently banning them from engaging in the alleged behavior.
Ohio claims the companies, which include mortgage brokers, lenders, and originators, unduly influenced appraisers.
"These companies have committed unconscionable acts or practices in violation of the Consumer Sales Practices Act by knowingly compensating, instructing, inducing, coercing, or intimidating appraisers for the purpose of improperly influencing the independent process," the statement said. "This undue influence results in the consumer owing more money on their mortgage than their house is actually worth, which prevents the consumer from refinancing."
Among Ohio companies targeted were Ace Mortgage Funding LLC in Cincinnati; Premiere Service Mortgage in West Chester; Island Financial LLC in Twinsburg; Apex Mortgage Services LLC, in Columbus -- which topped Entrepreneur magazine's 12th annual Hot 100; Robert C. Roach and the Valley Mortgage Group in Austintown; and First Ohio Banc & Lending Inc. in Independence.
California companies sued were Sage Credit Company LLC in Irvine, which began retail operations less than two years ago, and American Home Brokerage Corp. in Garden Grove. Also sued were Wall Street Mortgage Bankers, based in East Rockaway, N.Y., and All Line appraisals, from Phoenix, Ariz.
The litigation follows legislation signed by Colorado's Governor Bill Ritter that is designed to reduce appraisal fraud.
Senate Bill 85 prohibits mortgage brokers from improperly influencing a real estate appraisal and criminalizes the act of knowingly submitting a false appraisal, an announcement last week from the state said.
"It's only common sense that individuals involved in real estate transactions should have a duty to accurately represent the interests of home buyers," Colorado Attorney General John W. Suthers said in the statement.
New York's attorney general, Andrew Cuomo, has subpoenaed records from the appraisal firms of Mitchell, Maxwell Jackson Inc.; First American Corp.'s eAppraiseIT LLC unit; and Terra Holdings subsidiary Vanderbilt Appraisal Company LLC, Bloomberg reported. The state is attempting to determine whether mortgage brokers pressured appraisers to inflate property values. Mortgage broker Manhattan Mortgage Co. was also reportedly subpoenaed.
"Today's crackdown on appraisal fraud will help protect consumers and move us one step closer to driving unscrupulous lenders out of our communities," Dann said in Ohio's statement.