To view, click or mouse over the above tabs. Updated every Thursday for the previous week.
 

MMJ On The Forefront on Fight Against Appraiser Pressure

Bloomberg News
June 20th 2007
By Sharon L. Crenson

Cuomo Expands Probe as Appraisers Attest to Pressure (Update2)

 June 20 (Bloomberg) -- New York Attorney General Andrew Cuomo is asking home appraisers to declare in writing that they were improperly pressured by mortgage brokers and lenders to inflate estimates and that such practices damaged the market's integrity.

Miller Samuel Inc. and Mitchell, Maxwell & Jackson Inc., which together valued more than 13,000 Manhattan properties last year, both said they were asked to sign identical statements by Cuomo's staff. Both companies said they were told ``many'' appraisers were asked to sign the one-paragraph declarations.

The effort shows Cuomo may be expanding his probe of the real estate industry to include mortgage brokers, banks and loan officers who profited as Manhattan apartment prices doubled in the last five years. Cuomo has issued subpoenas to at least three appraisers and a mortgage broker. Ohio and Colorado are examining lender-appraiser relationships as well.

``It is clear to me that the targets of the investigation are mortgage brokers along with anyone else who exerts any form of economic pressure on appraisers,'' Y. David Scharf, a lawyer for Mitchell Maxwell, said in an e-mailed statement.

Cuomo spokesman Jeffrey Lerner declined to comment on the declarations because the probe is ongoing.

Mitchell Maxwell has also received a subpoena from Cuomo's office seeking information on brokers and lenders they work with. Scharf said the firm has complied. Miller Samuel has not received a subpoena, according to company President Jonathan Miller, who has been an outspoken critic of pressure on appraisers.

`Improperly Pressured'

The document Cuomo distributed says in part: ``I have been improperly pressured to reach a predetermined value for a property or to alter an appraisal after I completed it. I have also been threatened with the withholding of future business for refusing.''

Both appraisers signed the declaration after making revisions to it.

Miller said he removed the reference to being threatened, instead saying that he thinks he lost business because he wouldn't bow to pressure. He also changed a statement saying that such pressure has had ``a significant negative impact on the integrity of the real estate market'' to say that the impact has been on the mortgage industry.

``I was thrilled to help,'' said Miller, who writes about appraisal ethics on his blog, soapbox.millersamuel.com. ``It's a topic that I have been very outspoken against for a number of years.''

Closely held Miller Samuel values co-operatives, condominiums and townhouses in Manhattan. Miller also offers court testimony, estate valuations and market surveys. He said he started to emphasize those services because of the burden mortgage brokers and lenders put on him in connection with day-to-day appraisals.

`Root Cause'

Steven Knobel, co-founder of Mitchell Maxwell, amended the statement to say that mortgage brokers alone had pressured him and that he never gave in.

``I think that they were initially looking to see if appraisers were the root cause of the subprime thing,'' Knobel said, referring to rising U.S. home foreclosures led by borrowers with poor credit histories. ``It is evolving into a different investigation,'' he said.

Jeffrey Jackson and Knobel founded Mitchell Maxwell in 1991, according to the company's Web site. They have offices in Manhattan, Brooklyn, Manhasset and Riverhead, New York, and in Greenwich, Connecticut and work with some of the biggest U.S. mortgage lenders.

The company Web site says it is among the appraisers approved by Citigroup Inc., the world's biggest bank by market value, and Bank of America Corp., the second biggest U.S. bank.

Legislative Reform

Daniel Richman, a law professor at Columbia University in New York and former special assistant to the U.S. Attorney in the state's Southern District, said the statements Cuomo is collecting from appraisers could be used to win support for amending state laws.

``With the attorney general's office, they are playing on like 12 chessboards,'' Richman said. ``There's legislative reform, there's getting nice articles in the newspapers, there's getting public will behind funding.''

Cuomo is turning his attention to the real estate industry as he continues a nearly six-month investigation into the nation's $85 billion student-loan business. That probe has revealed what he calls kickbacks from lenders to colleges, lender payments to financial aid directors, and loan company staffing of school offices.

As of yesterday, 26 colleges and universities and the five largest U.S. student-loan providers had agreed to adopt a code of ethics barring such financial ties.

Cuomo's predecessor, Eliot Spitzer, went after banks and insurance companies and secured large financial settlements. His conflict of interest case against Wall Street investment banks yielded a $1.4 billion settlement with firms including Citigroup.

< Return to News & Press listing
News Page