$9.9M Settlement Reached In WaMu Appraisal Class Action Lawsuit

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After almost seven years of litigation, a $9.9 million settlement has been reached in a class action lawsuit alleging a conspiracy between appraisal firm First American eAppraiseIT (aka eAppraiseIT, LLC) and the now defunct Washington Mutual Bank to inflate home appraisal values.

An unopposed motion for preliminary approval was submitted to U.S. District Judge Ronald M. Whyte in a California federal court on Friday, Nov. 21, including a proposed schedule for how the settlement might be carried out beginning with a hearing on Dec. 5.

“It would be a gross understatement to say, after nearly seven years of litigation, merely that this litigation has been hard fought,” a memorandum in support of the motion for preliminary approval written by the attorneys said about the First American eAppraiseIT class action lawsuit originally filed in February 2008.

“The gravamen of the [Second Amended Complaint] is that [eAppraiseIT] entered into an agreement or understanding to provide appraisals to Washington Mutual Bank that were inflated when and where needed for [Washington Mutual] to make a loan,” they explained.

According to the home appraisal fraud class action lawsuit, Washington Mutual only wanted appraisals to be done by appraisers on an approved list and when appraisals were challenged by the bank, it would use eAppraiseIT and Lender Service Inc. to reconsider the value of the property and to increase appraisal values.

Lender Service and Washington Mutual were included in the initial class action lawsuit but were dropped from the litigation prior to the settlement. Washington Mutual was acquired by JPMorgan Chase following its collapse in 2008.

According to the First American eAppraiseIT class action lawsuit, the bank had also asked eAppraiseIT and Lender Service to hire its former employees and give them the power to reject property values declared by third-party appraisers.

EAppraiseIT and Lender Service allegedly complied with Washington Mutual’s requests and changed reports so that the higher property values were used and any negative references were removed.

Judge Whyte dismissed all but one allegation in 2009, which charged First American eAppraiseIT with violating the Real Estate Settlement Procedures Act (RESPA), which prohibits the appraisal company from receiving fees or kickbacks from federal backed mortgages.

In September, the California federal judge denied a motion for summary judgement on that charge, which moved the class action lawsuit into settlement negotiations.

“The settlement reached is certainly sufficiently fair to warrant the sending of notice and to fall within the range of possible approval — it provides settlement class members with meaningful cash relief to compensate them for the claims plaintiff pled in the second amended complaint,” the attorneys wrote.

EAppraiseIT “wound down its business in 2012,” but the bill for the class action settlement will be picked up by its parent company, CoreLogic Information Resources, LLC.

“Class Members who affirm that they paid for their [eAppriaseIT] appraisal will be entitled to RESPA Settlement Relief under which their pro rata share of the Settlement Fund with be calculated as three times the amount to be paid to those with only non-RESPA claims,” they explain further.

The plaintiffs are represented by J. Mark Moore and Robert Ira Spiro of Spiro Moore LLP, the Law Offices of Janet Lindner Spielberg, Joseph N. Kravec Jr. of Stember Feinstein Doyle Payne & Kravec LLC, and Michael D. Braun of the Braun Law Group PC.

EAppraiseIT is represented by John C. Hueston, A. Matthew Ashley and Justin N. Owens of Irell & Manella LLP.

The Home Appraisal Fraud Class Action Lawsuit is Spears, et al. v. Washington Mutual Inc., et al., Case No. 5:08-cv-00868, in the U.S. District Court for the Northern District of California.

The case was later renamed Spears, et al. v First American eAppraiseIT (aka eAppraiseIT LLC) after Washington Mutual was dropped from the class action lawsuit.