Fannie appraisal deal questioned

Fannie Mae (FNM) and Freddie Mac (FRE) are back under the spotlight. A federal bank regulator is questioning agreements the government-sponsored mortgage investors struck back in March in what was billed as a sweeping reform of the house-appraisal process.

The March agreements would allow Fannie and Freddie, the nation’s largest mortgage buyers, to buy loans only from banks that agree to certain standards of appraiser independence. The deal, stuck with New York attorney general Andrew Cuomo, came after Cuomo subpoenaed Fannie and Freddie in a lawsuit against an appraisal firm, seeking information on their due diligence practices.

But John Dugan, the comptroller of the currency, wrote Tuesday in a letter to the companies’ regulator that the new guidelines “violate or conflict with federal law in fundamental respects.” Dugan said the parties involved in the Fannie-Freddie deal - their regulator, the Office of Federal Housing Enterprise Oversight, and the office of New York’s attorney general - have no authority to dictate the internal structures of federally regulated banks. Moreover, Dugan says, the new rules would impose new costs on borrowers while providing no benefits. He says the best way to regulate the appraisal business is through thorough enforcement of existing federal laws, or by congressional action.

OFHEO said it forwarded Dugan’s comments to Fannie and Freddie and expects them to take action to “address unintended consequences” of the settlements. In the meantime, it says, “OFHEO will be overseeing this process and will continue to communicate with the banking regulators to ensure that their comments receive the highest attention.”