Ohio State Sues Realtors

Posted in General, June 8th, 2007 |

Ohio reeling under foreclosures, ranking third nationwide, has started to sue realtors based in Ohio, California, Arizona and New York, for putting pressure on appraisers to inflate property values. In Ohio it is specifically illegal to do so. Under the hammer have come 7 mortgage brokers, two lenders and one appraiser. Alarm bells rang when foreclosure in Ohio increased by 135% from the previous year making the state run past the national average on the double. It has snowballed into a socio-economic problem. Many have welcomed the move.

The borrower gets a loan on his house on an inflated appraisal. The trouble starts if he falls behind repayment schedules. Actual value of the property will not enable him to sell it and clear his dues. The lawsuit claims that appraisals have been made even without seeing the property.

Some lenders are being termed as predators. A crackdown will help to protect consumers in the future. Repeatedly overt and covert pressures have been put on the appraisers. The catch is that house owners are reluctant to pay for getting their property valued. A proper valuation might negate the loan. The realtors offer services for free by putting the pressure on the appraisers to get the deal clinched.

Some firms are above board dealers. They do not push values but check them. Patricia Amidon, a member of Appraisal Institute’s Government Relations Committee says that those who value property without examining it automatically violate trade organizations ethics.

The accused are charging Ohio Attorney General’s office for heavy handedness. Some are declining to make comments. The lawsuits are claiming $250,000 as civil fines – that is $25,000 from each defendant. Injunction is also being sought barring repetitions of similar acts.

At the root is that house owners want to borrow as much as they can, mortgage brokers try to locate the bank willing to advance and in between the appraisers are under pressure because they are dependent on the brokers to keep their business running.

The Attorney General is even thinking of suing Wall Street because it is their bond sales that have enabled consumers to get mortgages, which they otherwise would not have got. It is not just the appraisers – the prosecutors are on the look out for all the players in the game. Democrat Dann is focusing on this foreclosure bubble.

New York and Colorado also are following the footsteps of Ohio.