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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (28623)	11/7/2007 1:17:30 PM
From: E_K_S	Read Replies (1) of 78744

Verifying Appraisal Values for Fannie Mae & Freddie Mac loans.. New York Probes Government Lenders NY State Probe of Mortgage Conflicts Hits Fannie Mae, Freddie Mac money.cnn.com From the article:"...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..." --------------------------------------------------------------- I believe WM holds more of their loans as a "portfolio" lender, so this probe may uncover several other banks that may be more exposed to this kind of practice. By inflating the appraisal value, the lender obtains a higher loan amount which is then sold to Fannie May and Freddie Mac transferring the default risk. Banks guilty of this practice may have to purchase these loans back and would be put on probation for selling future packaged loans. EKS

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