Appraisal Pros Prose

Washington Mutual and eAppraiseIT are under investigation by Fannie Mae and Freddie Mac due to prodding by New York State Attorney Andrew Cuomo for allegedly pressuring appraisers to inflate value on properties.

At an investor conference in New York, WaMu said the outlook for the mortgage industry next year is bleaker than many believe, while shares of WaMu and other mortgage companies drop even further.

WaMu shares are down 56% this year and at their lowest point in more than seven years. WaMu, the country's biggest savings and loan, was the 6th largest US home mortgage lender in this year's first nine months.

Mr. Cuomo directed Fannie and Freddie to appoint examiners to look particularly at mortgages acquired from WaMu and any other loans made on the basis of appraisals by First American Corp.'s eAppraiseIT LLC subsidiary. Last week, his office filed a lawsuit against First American, alleging it violated federal and state laws by allowing WaMu to control the selection of appraisers hired to assess collateral for loans.

First American said last week the suit "has no foundation in fact or law."

WaMu said it will continue to ensure its operations comply with all applicable laws. WaMu also said both Freddie and Fannie have confirmed that they are continuing to purchase loans from WaMu "in accordance with their existing contracts."

Mr. Cuomo's staff isn't just looking at WaMu loans. He believes pressure on appraisers and inflated appraisals appear to be a very widespread problem in the industry.

Fannie Mae and Freddie Mac said they will both cooperate with the investigation.

Some tidbits of current information!

• GMAC's loss grows to $1.6 billion as mortgage revenues fall. The auto and home lender division partly owned by General Motors continues to drag down the automaker's bottom line.
• Citigroups shares fall 4.9% due to problems with the mortgage and debt market. The combined losses are estimated to by more than $30 billion, and many worry that more losses are in Citigroup's future.
• The new relief bills for homeowners that were being touted in Washington have either stalled or dropped from the radar. So far, only one relief program, the FHASecure program, has been put into action, but with strict regulations. It is feared that the program will not help those homeowners most in need of assistance to keep from losing their homes.
• Did you know of a piggyback credit card scheme that offers those with excellent credit to be paid to open accounts as authorized users for those with not such good credit? Then, the authorized users show an excellent FICO score and can qualify for the mortgage they would not normally be approved for. Industry experts state that much of the current foreclosure mess is due to score-inflation fraud.
• Homeowners that are current on their mortgage are not eligible for any loan modifications. So, even though the homeowner may be acting diligently in foreseeing a future problem in making their payments, the lenders will not even consider them for modification until they are at least two months behind in their payments. Even though recommending someone to stop paying their mortgage sounds like bad advice, lenders are afraid that those that are current on their mortgage will take advantage of the modification system though they do not need it. Loan mods are expected to account for 5 to 10% of all loan activity over the next 12 to 18 months.