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Mitchell Maxwell Revises Appraisal Rules Amid Probe (Update1)
By Sharon L. Crenson



July 17 (Bloomberg) -- Mitchell, Maxwell & Jackson Inc., the real estate appraiser subpoenaed in a state mortgage industry probe, said it won't provide preliminary values on homes it hasn't seen or allow customers to include their own estimates on orders.

The appraiser, which valued about 9,000 Manhattan properties last year, won't do quick valuations based on comparable homes nearby, the New York-based company said in a note to clients on its Web site. It also won't accept orders from mortgage brokers or lenders that include estimated values. Such practices have come under scrutiny in several state investigations.

``We wanted there to be absolutely no doubt that we were completely impartial,'' said Steven Knobel, co-founder of Mitchell Maxwell.

The company is revising its practices as New York Attorney General Andrew Cuomo, Ohio Attorney General Marc Dann and three other states investigate the mortgage industry, focusing in part on pressure applied to appraisers to inflate home values. Delinquencies on subprime home loans, those made to people with poor or limited credit histories, jumped to a 10-year high this year, prompting legal inquiries of the entire lending industry.

Inflated appraisals can lead to defaults if a homeowner borrows too much and can't sell or refinance for enough to pay off the loan.

Shopping Around

Providing so-called pre-comps, advance estimates mortgage brokers often ask for before ordering a formal appraisal, is a common request, said Pamela Crowley, an appraiser in Palm Bay, Florida, who moderates the on-line discussion group Appraisersforum.com.

The practice encourages mortgage brokers to shop around for appraisers who will give the highest estimates, enabling more loans to close for homeowners who want to refinance and extract equity, she said. Crowley opposes pre-comp requests.

``Value, comp checks, or pre-comps of any kind (written or verbal) will not be performed prior to us being engaged for that assignment,'' Mitchell Maxwell said in its client note. ``Although most are used for legitimate purposes, some individuals use them to `fish' for the appraiser with the highest value estimate.''

Mitchell Maxwell wanted to address the issue to set an example for the industry, said Y. David Scharf, the company's attorney.

`Bad Business'

``We decided, if that's an industry problem, we should address it,'' Scharf said. ``We didn't do it for other reasons, for other business reasons. We thought it was bad business to do that.''

His client has been told by Cuomo's office that it's not a target of the mortgage industry investigation.

On June 7, Ohio sued 10 real estate companies for improperly pressuring appraisers. The companies, including seven mortgage brokers, two lenders and an appraisal management company that coordinates orders for national lenders, are accused of setting specific estimated values on properties and communicating a desired price to appraisers, according to the lawsuits.

In New York, Cuomo is asking appraisers including Mitchell Maxwell and competitor Miller Samuel Inc. to sign declarations asserting mortgage brokers have tried to pressure them into inflating property values.

Under Scrutiny

Cuomo has also issued subpoenas to ``many, many'' companies, the attorney general said in a June 8 interview.

The companies that have publicly acknowledged receiving them are Mitchell Maxwell; Manhattan-based Vanderbilt Appraisal Company LLC; First American Corp.'s eAppraiseIT, based in Poway, California; and residential mortgage broker Manhattan Mortgage Co., which handled $3 billion in loans last year in New York and the surrounding area, according to Chief Executive Officer Melissa Cohn.

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, including Citigroup Inc., the world's biggest bank by market value, and Bank of America Corp., the second biggest U.S. bank.

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