Revamp Appraisal Standards, Regulators Urged

Senate Banking Committee leaders are urging federal banking regulators to "wake up" and revamp their appraisal standards, instead of complaining about the changes Fannie Mae and Freddie Mac have agreed to implement under a settlement with New York Attorney General Andrew Cuomo. The bank agencies have a role in setting appraisal standards for lenders, committee Chairman Christopher J. Dodd, D-Conn., said during debate on a major housing reform bill. "However, the appraisal fraud over the past couple of years, and the attorney general's action, should serve as a wake-up call to the regulators that their appraisal standards must be revamped and their enforcement stepped up," Sen. Dodd said. Sen. Richard C. Shelby, R-Ala., also urged the regulators to revamp their standards to strengthen appraisal independence. The senators made the comments as Sen. Elizabeth Dole, R-N.C., withdrew an industry-supported amendment to quash the New York attorney general's appraisal standards. Under the standards, Fannie and Freddie could not buy mortgages from banks and mortgage companies that use in-house appraisers or affiliated appraisal firms. The standards also prohibit mortgage brokers from ordering appraisals. The Dole amendment would have directed Fannie's and Freddie's regulator to establish appraisal standards for the two government-sponsored enterprises.