Agreement May Protect New Home Buyers
The N.Y. Attorney General has reached an agreement with Fannie Mae, Freddie Mac.
March 3, 2008— -- ALBANY, N.Y. (AP) -- New York Attorney General Andrew Cuomo ended an investigation into inflated home appraisals in an agreement announced Monday with government-sponsored lenders Fannie Mae and Freddie Mac.
The agreement would end the practice of using in-house staff for initial home appraisals and would prohibit the use of appraisal management companies owned or controlled lenders.
Fannie Mae and Freddie Mac, under the agreement, will only purchase loans that meet the new standards.
Cuomo says lenders have pressured appraisers to bump up the listed value of homes, contributing to a national mortgage crisis that is forcing families into foreclosure.
"We believe the appraisals were often fraudulent because of a conflict of interest and pressure on the appraisers," Cuomo said. "To us, this issue was a pervasive issue that needed to be solved."
The lenders acknowledged no wrongdoing in the agreement.
"We are pleased to work with regulators to do our part to ensure sound, accurate, independent and reliable appraisals," Fannie Mae General Counsel Beth Wilkinson said in a prepared statement.
She said Fannie Mae will make sure appraisals are independent and the valuation placed on a home is accurate under the Home Valuation Protection Code.
Fannie Mae will require lenders to conform to the code beginning in 2009.
Cuomo has been investigating billions of dollars of home loans that Fannie and Freddie bought from banks, including the largest U.S. savings and loan, Washington Mutual Inc.
"I believe consumer confidence should be restored," Cuomo said. "With these reforms we will have a safer, better evaluation process."
(Copyright 2008 by The Associated Press. All Rights Reserved.)
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