Fannie Mae and Freddie Mac 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 – which Fannie and Freddie reached with the Office of Federal Housing Enterprise Oversight and Andrew Cuomo, attorney general of New York – also create an independent organization to implement and monitor the new appraisal standards.
According to Cuomo's office, under the terms of the agreements, mortgage brokers will be prohibited from selecting appraisers, lenders will be prohibited from using in-house staff appraisers to conduct initial appraisals, and lenders will be prohibited from using appraisal management companies that they own or control.
‘With this agreement, Fannie Mae and Freddie Mac have become leaders in transforming the mortgage industry,’ says 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.’