By Karen Freifeld

June 8 (Bloomberg) -- New York can proceed with its lawsuit accusing First American Corp. of inflating home values under pressure from Washington Mutual Inc., a state appeals court ruled.

Neither federal law nor rules of the Office of Thrift Supervision bar the New York attorney general from suing First American and its eAppraiseIT unit, the appeals court in Manhattan said today.

EAppraiseIT gave in to demands for higher appraisals to secure more of Washington Mutual’s business, Attorney General Andrew M. Cuomo said when he sued in 2007. A First American spokesman disputed Cuomo’s allegation at the time. States including New York began investigations of the mortgage industry in 2007 as foreclosures rose nationwide.

via www.businessweek.com