SANTA ANA, Calif. (CN) - First American Corp. provided 260,000 false and inflated appraisals to Washington Mutual in the past 2 years, inflating its own share price through false and misleading statements, according to a shareholder derivative class action. The class claims First American did this through its subsidiary, eAppriaseIT.
The class claims WaMu was eAppraiseIT's largest customer. Plaintiffs claim that Santa Ana-based
"eAppriaseIT, at Washington Mutual's urging, provided materially false and inflated appraisals for properties where Washington Mutual sought to originate a mortgage. This enabled Washington Mutual to engage in real estate mortgage transactions that would otherwise have been untenable had the property at issue been correctly appraised. Senior executives at First American were aware of and willing to accommodate the request to falsify appraisals. Washington Mutual's competitive place in the market and profit were driven in large part by the number of mortgages it issued based upon artificially inflated appraisals issued by eAppriaseIT."
"eAppriaseIT, at Washington Mutual's urging, provided materially false and inflated appraisals for properties where Washington Mutual sought to originate a mortgage. This enabled Washington Mutual to engage in real estate mortgage transactions that would otherwise have been untenable had the property at issue been correctly appraised.
Senior executives at First American were aware of and willing to accommodate the request to falsify appraisals. Washington Mutual's competitive place in the market and profit were driven in large part by the number of mortgages it issued based upon artificially inflated appraisals issued by eAppriaseIT."
The complaint adds: "On Nov. 1, 2007, the New York Attorney General filed a complaint alleging that beginning in Summer 2006, Washington Mutual put pressure on eAppriaseIT to increase the appraised value of homes. ...
Defendants' improper appraisal practices during the relevant period [April 26, 2007 to the present]:
1. rendered the company's statements about its compliance with ethical and legal guidelines materially false and misleading; 2. rendered defendants' statements about the adequacy of the company's internal controls materially false and misleading; 3. caused certain of the company's reported financial information, including revenues associated with home appraisals, to be materially overstated throughout the relevant period; 4. caused the company's loan loss reserves, provisions for doubtful account and contingent liabilities to be materially understated during the relevant period; and 5. caused defendants to report financial results that were in violation of GAAP."
1. rendered the company's statements about its compliance with ethical and legal guidelines materially false and misleading;
2. rendered defendants' statements about the adequacy of the company's internal controls materially false and misleading;
3. caused certain of the company's reported financial information, including revenues associated with home appraisals, to be materially overstated throughout the relevant period;
4. caused the company's loan loss reserves, provisions for doubtful account and contingent liabilities to be materially understated during the relevant period; and
5. caused defendants to report financial results that were in violation of GAAP."
Plaintiffs are represented by lead counsel Glancy, Binkow & Goldberg of Los Angeles.
Source Document - Click here
Article Source: Courthouse New Service
Wednesday, May 27, 2009By Jonathan D. Silver, Pittsburgh Post-Gazette
A onetime real estate appraiser linked to the investigation of mortgages allegedly involving former Mt. Lebanon developer Bernardo Katz has been indicted by a federal grand jury.Perry Berardino, who once ran Perth Appraisal Inc., was charged May 20 with two counts of bank fraud.A grand jury indictment accuses Mr. Berardino of defrauding Flagstar Bank in 2002.The indictment said agents of a mortgage broker called America's Mortgage Outlet submitted loan applications to the bank that misstated information.Mr. Berardino, according to the indictment, prepared fraudulent appraisals of the properties that were to serve as collateral for the bank's loans by overstating their values.The second count deals with defrauding five other banks from 2000 to 2003 in much the same way, according to the indictment.A 2008 plea agreement between a former Bethel Park mortgage broker and the U.S. government identified Mr. Berardino as part of a group under investigation for mortgage fraud that includes Mr. Katz.When he lived in Mt. Lebanon, Mr. Katz amassed more than 100 properties in Allegheny County but has defaulted on numerous mortgages worth millions of dollars.No charges have been filed against Mr. Katz.Jonathan D. Silver can be reached at jsilver@post-gazette.com or 412-263-1962.First published on May 27, 2009 at 9:43 am
FOR IMMEDIATE RELEASEMay 27, 2009Media Contact:Andrew Gray (202) 898-7192angray@fdic.gov <mailto:angray@fdic.gov>Commercial banks and savings institutions insured by the Federal DepositInsurance Corporation (FDIC) reported net income of $7.6 billion in thefirst quarter of 2009, a decline of $11.7 billion (60.8 percent) fromthe $19.3 billion that the industry earned in the first quarter of 2008.Higher loan-loss provisions, increased goodwill write-downs, and reducedincome from securitization activities all contributed to theyear-over-year earnings decline. Three out of five insured institutionsreported lower net income in the first quarter and one in five wasunprofitable."The first quarter results are telling us that the banking industrystill faces tremendous challenges, and that going forward, asset qualityremains a major concern," said FDIC Chairman Sheila C. Bair. "Banks aremaking good efforts to deal with the challenges they're facing, buttoday's report says that we're not out of the woods yet." She added, "AsI see it, we're now in the cleanup phase for the banking industry. Itwill take some more time. But in the end, we'll have a stronger bankingindustry that's better able to meet the demand for credit as the economyrecovers."Insured institutions set aside $60.9 billion in provisions for loanlosses in the first quarter, an increase of $23.7 billion (63.6 percent)over the first quarter of 2008. Expenses for goodwill impairment andother intangible asset expenses totaled $7.2 billion, up from $2.8billion a year earlier. These negative factors outweighed the positiveeffects of increased noninterest income (up $7.8 billion or 12.8percent), higher net interest income (up $4.4 billion or 4.7 percent),and higher realized gains on securities and other assets (up $1.9billion). Twenty-one FDIC-insured institutions failed during the firstquarter, the largest number since the fourth quarter in 1992. The FDIC's"Problem List" grew during the quarter from 252 to 305 institutions, andtotal assets of problem institutions increased from $159 billion to $220billion.The FDIC also noted that asset-quality indicators continue to decline.Insured institutions charged off $37.8 billion in bad loans in the firstquarter, almost twice the $19.6 billion of a year earlier. The amount ofloans and leases that were noncurrent (90 days or more past due or innonaccrual status) rose by $59.2 billion during the quarter, and are$154.3 billion higher than a year ago."Troubled loans continue to accumulate, and the costs associated withimpaired assets are weighing heavily on the industry's performance,"Chairman Bair noted. "Nevertheless, compared to a year ago, we see somepositives. Net interest income is higher, and noninterest revenue is upat larger banks, particularly trading revenues. Realized gains onsecurities and other assets improved, too. But these positive factorswere outweighed by higher expenses for bad loans and for goodwillimpairment."Financial results for the first quarter are contained in the FDIC'slatest Quarterly Banking Profile, which was released today. Also amongthe major findings:Tier 1 capital growth reached a record high. Tier 1 capital rose byalmost $70 billion, the largest quarterly increase ever reported by theindustry. However, much of the increase occurred at institutions thatreceived capital from the U.S. Treasury Department's Troubled AssetRelief Program (TARP). A number of institutions also reduced theirdividends to support capital growth. Dividend payments in the firstquarter totaled $7.2 billion, about half the $14.0 billion insuredinstitutions paid in the first quarter of 2008. The FDIC noted that 97percent of insured institutions were well-capitalized by regulatorystandards.Total assets declined by $302 billion. Downsizing by a few large bankscaused total industry assets to fall by $302 billion (2.2 percent)during the first quarter. Two-thirds of all institutions reported assetgrowth in the quarter, but reductions at eight large banks caused theindustry total to decline. Total loans and leases fell by $159.6 billion(2.1 percent), while assets in trading accounts declined by $144.5billion (14.9 percent).The FDIC's Deposit Insurance Fund (DIF) reserve ratio fell to 0.27percent. Growth in insured deposits and a shrinking fund balance causedthe Deposit Insurance Fund's reserve ratio to decline from 0.36 percentof insured deposits to 0.27 percent in the first quarter. Insureddeposits increased by $82.4 billion (1.7 percent) during the quarter.The DIF balance declined from $17.3 billion at the end of 2008 (amendedfrom the originally reported unaudited balance of $19 billion) to $13.0billion on March 31, 2009. However, the FDIC Board of Directors approvedan amended restoration plan in February that is designed to restore theDIF reserve ratio to 1.15 percent within seven years. The FDIC hasalready set aside $28 billion in reserve to cover projected losses forthe next 12 months. In addition, the FDIC will collect more than $8billion in premiums during the second quarter, including $5.6 billionfrom the special assessment the FDIC Board approved on May 22."Insured deposits increased 1.7 percent in the quarter -- some $82billion -- and they are up by nine percent over the last 12 months,"Chairman Bair said. "This growth in insured deposits is a vote ofconfidence from bank customers. They obviously see the value of the FDICguarantee."The complete Quarterly Banking Profile is available athttp://www2.fdic.gov/qbp/index.asp <http://www2.fdic.gov/qbp/index.asp> on the FDIC Web site.# # #Congress created the Federal Deposit Insurance Corporation in 1933 torestore public confidence in the nation's banking system. The FDICinsures deposits at the nation's 8,246 banks and savings associationsand it promotes the safety and soundness of these institutions byidentifying, monitoring and addressing risks to which they are exposed.The FDIC receives no federal tax dollars – insured financialinstitutions fund its operations.FDIC press releases and other information are available on the Internetat www.fdic.gov <http://www.fdic.gov/> , by subscription electronically(go to www.fdic.gov/about/subscriptions/index.html<http://www.fdic.gov/about/subscriptions/index.html> ) and may also beobtained through the FDIC's Public Information Center (877-275-3342 or703-562-2200). PR-77-2009
Many real estate agents locally have told us that in three short weeks the system has appraisal problems that never occurred in the past. Most think from inexperienced appraisers from out of the market who are meeting values but producing an inferior appraisal product that is hung up in an underwriting scenario. Most have no clue as to where to turn for help.
NEW Video - Fannie Mae's Home Valuation Code of Conduct Recorded Web Seminar
Fannie Mae's newest pdf and video provide guidance to lenders and appraisers to supplement the policy requirements in the Fannie Mae Selling Guide for performing and underwriting the property appraisal securing mortgages delivered to Fannie Mae.
Guidance for Lenders and Appraisers - (.pdf, 130K, 26 pages)
Click the graphic below to start the online training video . . .
Top 11 Myths & Realities About The Home Valuation Code of Conduct
Are they True or False? Do YOU know the answers to ALL eleven Top Myths About The HVCC?
Myth: The HVCC requires lenders to use Appraisal Management Companies.
Myth: Mortgage sellers cannot achieve compliance without outsourcing the appraisal function.
Myth: “Loan Correspondents” or “correspondent lenders” are the same as mortgage brokers and they too cannot order appraisals.
Myth: Sellers cannot maintain the appraisal function internally (as an in-house operation), without loan production involvement.
Myth: Loan Production staff is prohibited from communicating with appraisers.
Myth: Outsourcing appraisal functions to an appraisal management company can reduce costs.
Myth: Outsourcing appraisal management to a third party reduces lender risk.
Myth: Use of third party vendors ensures the use of competent appraisers.
Myth: The licensing of an appraiser ensures his or her competency.
Myth: Professional appraisal designations cannot be used when evaluating the qualifications, education and experience of an appraiser.
Myth: “Comp checks” ? which are prohibited under the HVCC without an engaged appraisal assignment - are the only way to determine if there is sufficient value in the collateral before proceeding with a loan application.
Click here for the answers: Download Home Valuation Code of Conduct - Myths & Realities
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