FANNIE, FREDDIE TO OVERHAUL APPRAISALS IN CUOMO DEAL

March 3 – Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, reached an agreement with new York Attorney General Andrew Cuomo to buy mortgages only from lenders that adopt new standards intended to ensure independent home appraisals. The new rules announced today prohibit mortgage brokers from selecting appraisers and lenders from using in-house staff to do valuations for any home loans the government-chartered companies purchase. In most cases lenders will also be barred from using appraisal management firms they own or control. There are many significant provisions in the agreements that are designed to strengthen the independence of appraisers, including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.