John Dugan, the U.S. comptroller of the currency, said the accord that the two government-sponsored mortgage finance giants negotiated with New York Atty. Gen. Andrew Cuomo and their federal regulator was illegal, could hurt the home-loan industry and should be withdrawn.
The pact, reached in March and due to take effect next year, would bar Fannie and Freddie from buying a loan if the lender used an in-house appraiser or a mortgage broker ordered the appraisal.
Lenders have pressured appraisers to inflate the listed value of homes, contributing to a national mortgage crisis that is forcing families into foreclosure, Cuomo has said.
Dugan's office, a division of the Treasury Department, has authority to regulate mortgage lending by national banks.
In a 12-page letter to James B. Lockhart, director of the Office of Federal Housing Enterprise Oversight, which regulates Fannie and Freddie, Dugan said his office "strongly endorses the principle that real estate appraisals must be conducted free from influence or coercion by any party."
But creating a conflict-free environment is done by letting federal and state regulators enforce standards of mortgage lenders and brokers, "not by dictating the corporate and internal organizational structures of lenders."
The agreement with Fannie and Freddie could have "unintended and meaningful negative implications for the safe, sound and efficient operation of the mortgage lending industry, as well as for the cost of mortgage credit to consumers, without offsetting benefits," Dugan wrote.
A spokeswoman for Lockhart's office said it was reviewing Dugan's letter and had taken note of the concerns he raised, particularly regarding potential unintended results of the agreement. Changes to the appraisal agreement could result, she said.