Banking Law

Although it's fun to poke fun at Andy Cuomo's publicity-hounding ways, his investigation into Washington Mutual's appraisal practices continues to look like it might be based upon more than pure ether-induced hallucinations.  The Wall Street Journal reported last Friday that Wamu has been sued by former appraiser Jennifer Wertz, who alleges that Wamu pressured her to revise her fair market valuations upward, and black-listed her when she refused.

The appraiser, Jeniffer Wertz, says last May she determined that prices were falling in a neighborhood where she was doing appraisals, so she marked a box in one of her reports that indicated prices in the area were "declining." Marking that box generally forces the lender to reduce the loan amount and to increase the down payment by the borrower, which could place the deal at risk.

Ms. Wertz claims a WaMu sales manager contacted her about the report and instructed her to instead mark the box in her appraisal reports that indicated prices in the area were "stable." When Ms. Wertz refused, she was taken off the bank's preferred appraiser list and hasn't gotten more work, she says.

Wamu refused to comment on Ms. Wertz's allegations, but has previously denied that it engaged in "systematic efforts to inflate home appraisals." As a nuance-parser, I note that such a denial does not cover "ad hoc" efforts to inflate home appraisals.

A copy of Wertz's complaint is here. A previous post about Wamu's defense of a class action lawsuit over the appraisal practices of its third-party service provider is here. That earlier post also discusses an arbitration proceeding initiated by a former Wamu credit analyst who alleges that he was pressured not to downgrade a commercial credit.

UPDATE (1/23/08): For those who might miss the trackback or comment below, Brian Davis of Appraisal Scoop has much more on the Jennifer Wertz lawsuit against Wamu, including comments by Ms. Wertz and other appraisers.