More On Fannie, Freddie Standards Overhaul To Combat Appraisal Fraud

In a recent article, syndicated real estate columnist Kenneth Harney writes about the recent settlement agreement by Fannie Mae and Freddie Mac with the New York Attorney General and federal regulators in which they agreed to overhaul their appraisal standards and practices. An excerpt:

• [T]he new agreement is unprecedented. Fannie Mae and Freddie Mac are federally regulated corporations, answerable to Congress. Normally, they don't kowtow to state governments. But using a 1921 securities-fraud law unique to his state, New York Attorney General Andrew M. Cuomo brokered an agreement that transcends the normal reach of state governments -- one that could eventually touch almost every home mortgage transaction nationwide. Late last year, Cuomo began an investigation of potential appraisal fraud in the portfolios of Fannie Mae and Freddie Mac. [...] Cuomo never announced what, if anything, he found amiss at Fannie Mae and Freddie Mac. In the settlement agreement, both companies denied any wrongdoing. [...] Whatever the causes, Fannie Mae and Freddie Mac agreed to overhaul their appraisal standards and practices, signed on to a detailed home-valuation code of conduct covering all their mortgage activities, and committed to pay $24 million over the next five years to create and staff the independent institute that will oversee appraisals nationwide.

Reportedly, the National Association of Mortgage Brokers is none too happy about the deal and is exploring legal action. For more, see Fighting Back Against Corrupt Appraisals.

Click below to view the settlement agreements and the newly adopted appraisal code of conduct:

• Settlement agreement with Fannie Mae,
• Settlement agreement with Freddie Mac,
• Home Valuation Code of Conduct.

Go here for earlier posts on the deal between the NY AG, Fannie, Freddie, and federal regulators. OFHEO