Filed under: Good news, Federal Natl Mtge (FNM), Housing, Recession

The nation’s two largest sources of mortgage funds have agreed to sponsor a new home appraisal watchdog group to prevent inflated home values, Reuters reported Tuesday. Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will provide $12 million each over the next five years to create the new independent organization to monitor the new appraisal standards.

Seeking to avoid multiple lawsuits by New York Attorney General Andrew Cuomo, the two also agreed to a code of conduct to take effect January 1, 2009, The Wall Street Journal reported Tuesday (subscription required). Further, as the largest purchasers of mortgages, the code will become the effective new standard for the U.S. mortgage industry.

The new code bars lenders from using appraisals ordered by mortgage brokers, and also bars them from pressuring appraisers to supply inflated estimates of property values, which many believe were a major factor in the mortgage crisis.

Continue reading Fannie Mae, Freddie Mac agree to revise home appraisal standards

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