Tens of Thousands of Foreclosures Nationwide
There's also concern about the outlook for banks amid the losses related to the credit crunch and the housing slump.
A lawsuit filed today may shed light on how the home mortgage industry got into so much trouble.
As abc's T-J Winick reports the New York state attorney general accused the nation's largest mortgage company of conspiracy by exaggerating home values.
The credit crisis that has led to tens of thousands of foreclosures nationwide is, at least in part, due to a sinister game of bait and switch this, according to the New York attorney general's office.
"We tend to look for cases that are emblematic of systemic industry-wide fraud, and we believe this case does that," said Andrew Cuomo, New York State Attorney General.
The state of New York is suing "e-appraise-it" accusing the First American Corp. Subsidiary of caving in to pressure from Washington Mutual Inc. To use a list of "proven appraisers" who inflated home values.
"Our complaint outlines a number of instances when honest appraisers who are just trying to do their job honestly and accurately are kicked off the panel for not inflating their appraisals," said Eric Korngold, Assistant New York State Prosecutor.
The inability of many borrowers to cover loan payments once they re-set led to the current credit crunch.
State Attorney General Andrew Cuomo alleges the scam worked this way:
In 2005 and 2006, "e-appraise-it" would make initial loans at low "teaser" rates, which then reset substantially higher rates one to three years later at levels some borrowers couldn't afford.
"These are bad acts, bad behaviors and broken laws that are occurring right now, right in the middle of this mortgage crisis," said Korngold.
T-J Winick, abc news said, "Cuomo claims "e-appraise-it" and its parent company knew its actions were illegal, citing email evidence."
The defendants have had no comment.
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