WASHINGTON – The Comptroller of the Currency is protesting an agreement by Fannie Mae and Freddie Mac to stop buying mortgages involving lenders’ in-house appraisers, which was intended to protect buyers from fraudulently inflated home prices.
Comptroller John Dugan is urging for withdrawal of the agreement that the two companies signed with New York Attorney General Andrew Cuomo and their federal regulator, the Office of Federal Housing Enterprise Oversight, asserting the deal violates federal law and could have an unintended negative impact on the mortgage industry.
The regulator for national banks Tuesday joined another federal regulator, the Office of Thrift Supervision, and mortgage interests who previously criticized the agreement due to take effect next year, which would ban lenders from using in-house appraisers and block mortgage brokers from ordering appraisals.
The deal would end an investigation by the New York attorney general’s office into billions of dollars of loans Fannie and Freddie had bought from lenders. Fannie and Freddie agreed to buy only mortgages for which appraisals are made by firms independent from lenders.
Dugan said his office “strongly endorses the principle that real estate appraisals must be conducted free from influence or coercion by any party,” in a letter to OFHEO, which oversees Fannie and Freddie. But, he said, creating a conflict-free environment is done by letting federal and state regulators enforce standards of mortgage lenders and brokers, “not by dictating the corporate and internal organizational structures of lenders.”
Congress is weighing whether to issue its own appraisal standards as part of a mortgage rescue package making its way through the Senate.
