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Appraisal inflation lawsuit moves forward

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Federal law does not preempt New York Attorney General Andrew Cuomo from suing First American Corp. and its eAppraiseIT unit for allegedly bowing to pressure from Washington Mutual to inflate property valuations during the housing boom, a state appeals court ruled Tuesday.

The 2007 lawsuit — part of a broader investigation by Cuomo into the mortgage securitization process that led to Fannie Mae and Freddie Mac adopting new rules for appraisals — has been held up by First American’s claim that federal regulators have jurisdiction.

The New York State Supreme Court for New York County ruled that neither federal statutes nor the regulations and guidelines implemented by the Office of Thrift Supervision preempt Cuomo’s lawsuit.

Washington Mutual, which was acquired by JP Morgan Chase in September 2008 after being placed in receivership, was not named in the lawsuit. First American and eAppraiseIT have denied allegations that they assigned work to appraisers who were willing to inflate valuations in order to win business from WaMu.

A spokesman for eAppraiseIt told Bloomberg News that that the company expects to be vindicated at trial, noting that the appeals court decision made no determination as to Cuomo’s allegations.

As of June 1, CoreLogic and First American Financial Corp. are separate, independent publicly traded companies, with eAppraiseIT part of CoreLogic.

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