The nation’s two largest backers of home loans have reached a deal with New York Attorney General Andrew Cuomo that could help eliminate inflated mortgage appraisals, the Wall Street Journal reports. Fannie Mae and Freddie Mac have agreed to buy mortgages only from banks that follow a new code of conduct requiring independent appraisals.
Analysts say inflated appraisals were a major contributor to the housing collapse. The new code prohibits lenders from using in-house appraisers or appraisal management companies they own, and mortgage brokers will be barred from selecting appraisers. Fannie and Freddie will begin using the code January 1, and will create an agency to monitor the standards.