Appraisal Reform Accord Reached By NY Attorney General and GSEs

Mar 3, 2008

New York Attorney General Andrew M. Cuomo announced an agreement on Monday between his office and Freddie Mac and Fannie Mae under which the two largest purchasers of home loans will buy home mortgages only from those lenders that meet new standards that it is hoped will ensure independent and reliable appraisals.

The agreement which also includes the Office of Federal Housing Enterprise Oversight (OFHEO) will create an independent organization to implement and monitor the new appraisal standards.

Fannie Mae and Freddie Mac, which purchase roughly 60 percent of all home loans originated in the United States, have agreed to the following:

"Today's agreement with Fannie Mae and Freddie Mac begins to set right what had gone so horribly wrong in the mortgage industry - rampant appraisal fraud," said Cuomo. "The integrity of our mortgage system depends on independent appraisals. Again and again our industry-wide investigation found that banks were putting pressure on appraisers to drive up the value of loans just to make a quick buck. We believe the new standards, and the new independent monitor agreed to today, can begin to erase this problem from the industry."

"Accurate, independent appraisals are very important to ensuring the safety and soundness of Fannie Mae and Freddie Mac and the mortgage market," said OFHEO Director James Lockhart. "OFHEO is committed to working closely with fellow regulators, the Attorney General, Fannie Mae, Freddie Mac, appraisers, lenders and other market participants to assure that the roll-out of the new code builds upon best practices, recognizes constructive comments to identify further refinements, and avoids unintended consequences."

The new rules had been rumored late last week but apparently OFHEO had asked for more time to consult with other bank regulators. Reportedly Cuomo had laid down an ultimatum telling Freddie, Fannie, and OFHEO that he wanted a deal by early this week or he would sue.

Read More: Mortgage Daily News

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