Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, have 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 yesterday prohibit mortgage brokers from using in-house staff to do valuations for any home loans the government-chartered companies purchase. Lenders will also be barred from using appraisal management firms they own or control.
“We believe the appraisals were often fraudulent because there were conflicts of interest and pressure on the appraisers,” Cuomo said.
Mortgage lenders that own appraisal companies include Countrywide Financial Corp., the nation’s largest home-loan originator.