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Deal Nears to Curb Home-Appraisal Abuse
By AMIR EFRATI
February 26, 2008; Page A3

Mortgage giants Fannie Mae and Freddie Mac are close to a deal with New York Attorney General Andrew Cuomo to make changes meant to discourage inflated appraisals, widely viewed as an important contributor to the mortgage crisis, according to people familiar with the matter.

The proposal, in which the two government-sponsored companies would require lenders they work with nationwide to change their appraisal practices, would cap a year-long probe by Mr. Cuomo's office that has already resulted in a lawsuit against an appraisal-management company, for allegedly submitting to pressure by a big lender to inflate appraisals.

The agreement, which could take effect as early as this fall, might still fall apart, people familiar with the matter said. If completed, the proposed changes might significantly alter how appraisals are done across the country.

In one change being discussed, according to people familiar with the matter, Fannie and Freddie would prohibit lenders they work with from hand-picking or using in-house appraisers, to curb potential conflicts of interest. The two also would agree not to buy loans from lenders who used appraisals by wholly owned subsidiaries, according to a person familiar with the matter. The deal may also include a provision that Fannie and Freddie, which guarantee or acquire mortgages from lenders and package many of them into securities for sale, require lenders to refuse to rely on appraisals arranged by individual mortgage brokers, that person said.

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Originally posted by mandimandi

Does anyone know if Fannie is going to run the "clearinghouse", or will it be an AMC?

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