| Probe eyes possibility of inflated real estate values in Manhattan |
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NEW York State is investigating Manhattan real estate practices, seeking information about whether brokers pressured appraisers to inflate property values as prices doubled in the last five years, Bloomberg News reported on Friday. "It's a rather large, broad, sweeping request for enormous amounts of information on everyone we work with," Mitchell, Maxwell & Jackson co-founder Jeffrey Jackson said. The appraiser, which evaluated about 20,000 properties last year in the New York region, said it received the subpoena "about 10 days ago." Rising foreclosures throughout the United States have spurred state officials to propose consumer protection laws and mortgage refinancing programs to help homeowners. The number of homes entering foreclosure has hit an all-time high. The number of borrowers with poor or limited credit histories who are behind in their payments is the most since 2002, according to the Washington-based Mortgage Bankers Association. Investigation target Y. David Scharf, an attorney at New York law firm Morrison Cohen LLP, who is representing Mitchell, Maxwell & Jackson, said his client has been told it's not a target of the investigation. "The information that is being requested is whether or not pressure has been brought to bear on appraisers to change their appraisals," Scharf said. The firm is "continuing to gather information" in response to the subpoena, he said. "We did not change appraisals in any circumstances," he said. Cuomo spokesman Jeffrey Lerner confirmed that the attorney general's office issued subpoenas to Mitchell, Maxwell & Jackson and to Manhattan Mortgage. Lerner declined to comment further. In March, Cuomo said at a press conference that his office was investigating subprime lenders. Scharf said the subpoena called for information about "mortgage lenders, mortgage brokers, real estate brokers and sales persons and appraisal management companies." A borrower who gets a home loan based on an inflated appraisal and falls behind on payments would have difficulty selling or refinancing for enough to pay off the mortgage. Jackson and Steven Knobel founded Mitchell, Maxwell & Jackson in 1991, according to the company's Website. The appraiser has offices in Manhattan, Brooklyn, Manhasset and Riverhead, New York, as well as Greenwich, Connecticut. Appraisers determine the value of a home for the purpose of financing. Manhattan Mortgage handled US$3 billion in loans last year in New York and the surrounding area, said Cohn. She started the company 22 years ago, according to the newsletter "Real Estate Weekly." New York appraisers Miller Samuel Inc and Vanderbilt Appraisal Co, competitors to Mitchell, Maxwell & Jackson, said they had not received subpoenas. Appraisers frequently face pressure to revise their findings, said Jonathan Miller, president of Miller Samuel. "I would seriously doubt that there is one appraiser in the United States that has not been on more than one occasion pressured to make a number," Miller said. Bogus appraisals In a study conducted last year by Richfield, Ohio-based October Research Corp, 90 percent of appraisers said they felt influenced to write bogus appraisals. Four years ago, that number was 55 percent. Seventy-one percent said mortgage brokers asked them to do it. Also, New York Governor Eliot Spitzer announced a task force to analyze loan and foreclosure data and make recommendations to protect subprime borrowers including minorities and the elderly. The group, led by state Banking Superintendent Richard Neiman, will also "pursue enforcement actions against those engaging in wrongful conduct and, where appropriate, coordinate these actions with other federal, state and local law enforcement agencies," Spitzer said in a news release. Ohio Attorney General Marc Dann said on May 15 that he wants to sue Wall Street firms because their bond sales enabled consumers to get mortgages they couldn't afford. Ohio has already won the right through a lawsuit to review foreclosures by New Century Financial Corp, the bankrupt California-based lender. Dann may add investment banks and credit-rating firms to the case or bring new suits, perhaps using Ohio's civil version of the federal Racketeer Influenced and Corrupt Organizations Act. By Sharon L. Crenson "shanghaidaily" |
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| Last Updated ( Friday, 06 July 2007 ) |
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