New York's top court has cleared the state attorney general to pursue allegations that First American Corp. and subsidiary eAppraiseIT inflated property appraisals under pressure from client Washington Mutual.
The Court of Appeals says federal regulations do not pre-empt state claims alleging fraud and violations of real estate appraisal rules.
Then-Attorney General Andrew Cuomo brought the 2007 civil suit alleging the practice contributed to the national subprime mortgage crisis.
Washington Mutual collapsed in 2008 and became the nation's largest bank failure ever.
Six top court judges ruled that Congress envisioned "a robust partnership with the states" in aiming to prevent real estate appraisal abuse.
In a dissent, Judge Susan Read says the suit challenges a bank's federally regulated mortgage practices.