WASHINGTON (Reuters) - Mortgage firms Fannie Mae FNM.N and Freddie Mac FRE.N would require their mortgage lending partners to have independent appraisals of home values under a deal being thrashed out with New York's attorney general, sources familiar with a draft deal said on late Monday.
Andrew Cuomo, New York’s top lawyer, began a wide-ranging investigation last spring into how Wall Street bundled and sold billions of dollars of home loans to investors and a deal with Fannie Mae and Freddie Mac would close an important line of his inquiry.
Home appraisals would have to come from assessors that do not have formal ties with a lender or mortgage broker, according to sources familiar with negotiations over a deal that could be finalized as soon as Tuesday.
Lenders wishing to sell their mortgages to the nation’s two largest sources of home finance would have to make sure that they did not rely on in-house appraisers and did not own an appraisal firm itself, according to an outline of the plan drafted by Fannie Mae and which has been obtained by Reuters.
Details of the plan were first reported by the American Banker in its Tuesday edition.
Fannie Mae and Freddie Mac would create a clearinghouse of appraiser information conduct and activity, according to the plan, sources familiar with a draft said on Monday.
“All lenders will be required to provide post-purchase copies of appraisal documents to the Clearinghouse,” according to a Fannie outline of the plan. “It will be an independent entity with an executive and board of directors (and) It will staff a hotline for industry and consumer complaints.”
The new standards could be in place by September, the sources said.
Cuomo’s spokesman Jeffrey Lerner said that the attorney general’s office has had discussions with Fannie Mae and Freddie Mac for several months. “At the end of the process, we will either have agreements or we will take other appropriate action,” he said in a statement.
In November, Cuomo’s office subpoenaed Fannie Mae and Freddie Mac records as part of an expanding probe of the $10 trillion U.S. home mortgage industry.
Sources said a formal deal was supposed to have been finalized on Monday but was postponed at the last minute.
A spokesperson for Fannie Mae could not be reached, while a spokesman for Freddie Mac said that he could not comment on any potential deal.
A spokeswoman for the Office of Federal Housing Enterprise Oversight, the mortgage finance companies’ federal regulator, said discussions of a possible settlement were ongoing.
Reporting by Patrick Rucker; Editing by Jan Dahinten
Our Standards: The Thomson Reuters Trust Principles.