Lawsuits have been filed in federal courts in Phoenix and Seattle, respectively, which accuse the nation’s two biggest mortgage lenders of using their industry influence to twist the independent home-appraisal process into a corrupt moneymaking scheme. Each lawsuit is requesting class action status. It’s alleged in the Phoenix lawsuit that Wells Fargo used an affiliated management company to force appraisers into doing the lender’s bidding. The Seattle lawsuit makes similar allegations about Countrywide, which is now a wholly owned subsidiary of Bank of America.

The lenders are accused in the lawsuits of violating the Real Estate Settlement Procedures Act, which protects consumers involved in real estate transactions, and the Racketeering and Corrupt Policies Act. The Wells Fargo lawsuit names Valuation Information Technology LLC, also called Rels Valuation, the bank’s designated appraisal management company as a defendant. In the Countrywide suit, its appraisal management company, LandSafe named as a defendant.

An appraisal management company arranges with third-party appraisal firms to appraise each property involved in a new or refinanced mortgage loan. It’s alleged in both lawsuits that those companies drove down the price of appraisals by threatening to “blacklist” appraisers who didn’t agree to the lower fees, but continued to charge the bank’s customers a higher rate. The firms are also accrued of threatening to “blacklist” appraisers who did not provide whatever appraisal amount the banks were seeking for each home. If the proof in these cases backs up the complaints’ allegations, the defendants are in trouble. Robert Carey, a lawyer with Hagens, Berman, Sobol, Shapiro, is representing the plaintiff in the Phoenix case. Steve Berman, a lawyer with the same firm is handling the Seattle litigation.

Source: Associated Press

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