NY AG, Fannie, Freddie, Feds Reach Agreement Expected To Deal Major Blow To Appraiser Strong-Arming, Appraisal Fraud In Home Mortgage Lending Industry

An announcement from the New York State Attorney General's Office:

• Attorney General Andrew M. Cuomo [yesterday] announced that the nation’s two largest purchasers of home loans, Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), have entered into cooperation agreements requiring them to only buy loans from banks that meet new standards designed to ensure independent and reliable appraisals. The agreements, among the New York Attorney General, Fannie Mae, Freddie Mac and their federal regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), also create an independent organization to implement and monitor the new appraisal standards. [U.S.] Senator Charles Schumer, Chair of the Senate Banking Committee’s Housing Subcommittee, praised the agreement and the reforms which he has supported.

• “With this agreement, Fannie Mae and Freddie Mac have become leaders in transforming the mortgage industry,” said Cuomo. “Now national banks have a clear choice: immediately adopt the new code and clean up appraisal fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac – it is that simple.”

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• “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. I want to particularly thank Senator Schumer for all of his help in readying this important agreement today.”

In exchange for Fannie Mae & Freddie Mac entering into these agreements, Attorney General Cuomo has agreed to terminate its investigations into Fannie & Freddie. However, a lawsuit by the NY AG alleging widespread dubious appraisals against First American and its subsidiary eAppraiseIt is still pending, and the NY AG's industry-wide investigation into mortgage fraud continues.

In addition, an impending turf battle between the New York AG's office and OFHEO, a federal government agency, regarding the investigation into Fannie and Freddie has, by reason of these agreements, has apparenly been settled amicably (see earlier post - Feds vs. NY AG: Lending Fraud Probe Turf Battle Emerging?).

For a summary of the agreements, see NY Attorney General's Press Release: New York Attorney General Cuomo Announces Agreement With Fannie Mae, Freddie Mac, And OFHEO (Nation’s Two Largest Purchasers of Home Loans Agree to Only Buy Mortgages From Banks That Meet Requirements of New Home Value Protection Code ~Independent Institute Established with $24 Million from Fannie Mae and Freddie Mac to Implement and Monitor Code ~Senator Schumer Praises Agreement).

Go here for the OFHEO Press Release.

Click below for the Home Value Protection Program and Cooperation Agreements:

• NY Attorney General and OFHEO with Fannie Mae ,
• NY Attorney General and OFHEO with Freddie Mac.

Go here for the newly adopted Home Valuation Code of Conduct.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this announcement.