BEIJING, Nov. 2 (Xinhuanet) -- The first major development of New York Attorney General Andrew Cuomo's nine-month probe into the mortgage industry came Thursday when a suit was filed against First American Corp and one of its units for allegedly colluding with Washington Mutual Inc. to inflate the appraisal values of homes.

    The attorney general's office has sent hundreds of subpoenas and has uncovered "fundamental flaws" in two areas of the market -- appraisals and securitization of mortgage loans that helped trigger the mortgage market meltdown, officials said.

    The lawsuit, filed in New York Supreme Court, contends that First American and its real estate appraisal subsidiary eAppraiseIT violated appraiser independence laws. Washington Mutual, the largest U.S. savings and loan, was not named as a defendant in the case.

    eAppraiseIT, known as EA, "caved to pressure" from Washington Mutual to use a list of preferred appraisers who provided inflated home appraisals, the attorney general's office said.

    "First American helped set the current mortgage crisis in motion," Cuomo said in a statement. "The independence of the appraiser is essential to maintaining the integrity of the mortgage industry. First American and eAppraiseIT violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike."

    Cuomo said at a news conference there were jurisdictional questions involving Washington Mutual that affect whether or not he brings a case against the bank.

    "There are issues of federal preemption ... and questions about state attorney generals' jurisdiction on federal institutions," Cuomo said, when asked if he would bring a separate action against Washington Mutual.

    Cuomo, who served as Secretary of Housing and Urban Development under U.S. President Bill Clinton, also said the issues surrounding appraisals were not new, and accused federal authorities of being "asleep at the switch once again."

    (Agencies)