Federal regulator criticizes Cuomo appraisal pact
WASHINGTON—A federal regulator and powerful mortgage industry interests are criticizing New York Attorney General Andrew Cuomo's plan to reshape the appraisal industry.
Cuomo reached an agreement in March with mortgage finance companies Fannie Mae and Freddie Mac that was designed to alleviate what he called widespread pressure on appraisers to inflate their estimated value of homes.
The agreement, scheduled to take effect next year, would ban lenders from using in-house appraisers, and would block mortgage brokers from ordering appraisals.
However the federal Office of Thrift Supervision said the agreement was based on a "flawed" process, without adequate input from lenders or federal regulators.
In a letter this week, Timothy Ward, the agency's deputy director, said the agreement is likely to be costly for lenders, and may force some to sell off their appraisal or real estate settlement businesses.
"As long as the independence of the appraisal process is ensured, there is no reason to prohibit such affiliations or subsidiary business arrangements," Ward wrote.
Industry groups also are unhappy. The Mortgage Bankers Association, in a letter to Fannie Mae and Freddie Mac, questioned Cuomo's authority to set a national standard.
The trade group also criticized the ban on affiliated appraisers, saying there is "no evidence" that they are more likely to be pressured than unaffiliated counterparts.
The National Association of Mortgage Brokers, which has threatened a lawsuit to block the new rules, marshaled a national letter-writing campaign against the rules, which they say would put them at a disadvantage to banks.
Not everyone is unhappy, however. Jim Amorin, president-elect of the Appraisal Institute, said in an interview, that the agreement is "a good first step toward insuring there's appraiser independence."
However, he said mortgage brokers could still be a part of the process "as long as they're regulated in some way."
Cuomo said in a prepared statement that "it is not surprising that current industry participants, many of whom have significant economic interests of their own at stake, have differing perspectives about the various provisions in the agreements."
He said his office would "thoughtfully consider their suggestions," along with the Office of Federal Housing Enterprise Oversight, which regulates Fannie Mae and Freddie Mac. An OFHEO spokeswoman said Fannie and Freddie will recommend potential changes after reviewing comments from industry groups and others.
