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Fannie, Freddie OK Appraisal Deal

New code will discourage inflated appraisals for home mortgages

By Jim O'Neill,  Newser User

Posted Mar 4, 2008 8:20 AM CST
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(Newser) – 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.

NY Attorney General Andrew Cuomo speaks to the media at his office, Wednesday, Nov.7, 2007, in New York. Cuomo announced that his office has sent Letters of Notice and Demand including subpoenas and demand for an independent examiner to the nation's two largest financiers of home mortgages, Fannie Mae...
NY Attorney General Andrew Cuomo speaks to the media at his office, Wednesday, Nov.7, 2007, in New York. Cuomo announced that his office has sent Letters of Notice and Demand including subpoenas and demand...   (Associated Press)
Fannie Mae President and Chief Executive Officer Daniel Mudd, makes his remarks during a forum on housing, Monday, Dec. 3, 2007, at the National Press Club in Washington. (AP Photo/Manuel Balce Ceneta)
Fannie Mae President and Chief Executive Officer Daniel Mudd, makes his remarks during a forum on housing, Monday, Dec. 3, 2007, at the National Press Club in Washington. (AP Photo/Manuel Balce Ceneta)   (Associated Press)
The Fannie Mae building in Washington, in this May 2, 2007 file photo, in Washington. Fannie Mae, the largest U.S. buyer and guarantor of home mortgages, agreed to a deal with New York's attorney general to curb appraisal inflation.
The Fannie Mae building in Washington, in this May 2, 2007 file photo, in Washington. Fannie Mae, the largest U.S. buyer and guarantor of home mortgages, agreed to a deal with New York's attorney general...   (Associated Press)
Richard Syron, chairman and CEO of Freddie Mac, talks about the sub-prime lending crisis and its effect on the housing market in Boston in this April 27, 2007 file photo. Freddie Mac set aside $1.2 billion in the third quarter to account for bad home loans and posted a...
Richard Syron, chairman and CEO of Freddie Mac, talks about the sub-prime lending crisis and its effect on the housing market in Boston in this April 27, 2007 file photo. Freddie Mac set aside $1.2 billion...   (Associated Press)
New York Attorney General Andrew Cuomo speaks to the media at his office, in New York, on Wednesday, Nov. 7, 2007. Cuomo announced that he issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry....
New York Attorney General Andrew Cuomo speaks to the media at his office, in New York, on Wednesday, Nov. 7, 2007. Cuomo announced that he issued subpoenas to government-sponsored lenders Fannie Mae and...   (Associated Press)
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Growing Fannie, Freddie brings risks of its own
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housing market • Freddie Mac • Andrew Cuomo • Fannie Mae • appraisals • subprime crisis

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