Fannie & Freddie Mortgages in the Crosshairs

[SHELLY]

New York Probes Government Lenders
Wednesday November 7, 1:19 pm ET
By Michael Gormley, Associated Press Writer

NY State Probe of Mortgage Conflicts Hits Fannie Mae, Freddie Mac


ALBANY, N.Y. (AP) -- New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry.Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual Inc. The subpoenas also seek to find out how the government-sponsored companies handle appraisals.

Cuomo said Fannie Mae and Freddie Mac have agreed to his demand that an independent examiner, subject to the attorney general's approval, review all Washington Mutual appraisals and mortgages done with the two government-sponsored lenders.

"In order to fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual's mortgages have not been corrupted by inflated appraisals," Cuomo said.

"Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender's interest," Cuomo said. "Knowing this, Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals."............http://biz.yahoo.com/ap/071107/cuomo_mortgages.html

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[SHELLY]

Goofer,

How about that GM, China, Cuomo-induced wild ride on Wall Street Today! -360 and change :eek: :puke:

Tomorrow the ECB on rates AND Bernanke speaks to Congress....don't toss out that sick bag yet. ;-)

(PS: Meltdown no longer "eminent"...time to change my avatar)


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[Mango]

Shelly changed her tar. :eek:

Attorney General Cuomo’s investigation uncovered a series of e-mails between executives at EA, First American, and WaMu that show EA officials were willingly violating state and federal appraisal independence regulations to comply with WaMu’s demands:

On February 22, 2007, in response to a description of the WaMu “Proven Appraiser” program as one in which “we will now assign all Wamu’s work to Wamu’s ‘Proven Appraisers’… [and] Performance ratings to retain position as a Wamu Proven Appraiser will be based on how many come in on value,” eAppraiseIT’s president told senior executives at First American: “we have agreed to roll over and just do it...”

On April 4, 2007, eAppraiseIT’s executive vice president stated in an e-mail to First American: “we as an AMC [Appraisal Management Company] need to retain our independence from the lender or it will look like collusion… eAppraiseIT is clearly being directed who to select. The reasoning… is bogus for many reasons including the most obvious – the proven appraisers bring in the values.”

On April 17, 2007, eAppraiseIT’s president wrote an e-mail to First American explaining why its conduct was illegal: “We view this as a violation of the OCC, OTS, FDIC and USPAP influencing regulation.”

E-mail evidence also shows that WaMu pressured EA to inflate appraisals as a condition for doing future business together:
On September 27, 2006, First American’s vice chairman reported that a WaMu executive told him: “if the appraisal issues are resolved and things are working well he would welcome conversations about expanding our relationship…”____________________________________ ______________________
The time period was also between April 2006 and Sept. 2007. They did a little over 256,000 appraisals for WAMU over that time, so if you really think about this, Cuomo is trying to prove that a majority of the people were stupid enough to buy homes in a declining market that were over-valued.

I don't think he has sufficient evidence with these e-mails.
First of all, an attorney worth his salt will prove that all banks have an Approved Appraiser list. Also, when Banks use these nationwide type of appraisal companies that select appraisers from a list, it's not uncommon for them to select someone who doesn't really know the market in a particular county. I have seen Equity lenders use firms like these and some of the appraisers come from as far as two counties away. Some markets really require the use of someone who is local.

I am also surprised to see, and I am not defending WAMU, but I have dealt with them on a wholesale level, and we had to use appraisers from an approved list, (most of them were on the same list as other Banks) and these appraisers were very conservative types. Further, WAMU wholesale was the only Bank I dealt who not only had the underwriters review appraisals but also had on-staff appraisers who had to sign off on them as well.