- States Can Regulate Appraisers
- April 6, 2013 | Author: Tiffany Kouri Spinella
- Law Firm: Pullman & Comley, LLC - Hartford Office
The State of New York brought legal action against First American Corporation and E Appraise It, LLC claiming violations of New York law with respect to alleged fraudulent and deceptive actions committed by the defendants in their appraisal business. The complaint stemmed from the mortgage underwriting practices of Washington Mutual (WAMU) prior to the 2008-2009 financial meltdown. WAMU, then the largest nationwide thrift institution, retained the defendants for a significant portion of their New York appraisals. Essentially, the New York Attorney General asserted that the defendants succumbed to pressure from WAMU to generate higher appraisal values than were warranted.
The appraisal firms attempted to defeat the law suit by maintaining that the regulation of appraisers is entirely a matter of federal law and as a result, no state should attempt to do so.
The New York Court of Appeals, that state’s highest court, rejected this claim concluding that the state could rein in fraudulent practices even in the face of significant federal regulation of appraisers.
Federal oversight of insured thrift institutions would not be hampered, the Court of Appeals held, by the consumer-oriented action taken by New York. Congress, the court ruled, “did not intend to occupy the entire field with respect to appraisal” practices. Fraud and misrepresentation typically are the kinds of conduct that state governments are permitted to address even in the face of federal regulation of the industries in which these practices may take place.
People ex rel Cuomo v. First American Corp., 18 N.Y.3d 173 (2011).