Cuomo as NY Attorney General also launched an investigation into Fannie Mae and Fannie Mac — maybe his time at HUD taught him how unscrupulous they were. Why not wait until all the facts are in instead of immediately trashing Senator McCain. Notice how the anti-McCain crowd has jumped on this. Now for the rest of the story:
From SEMom: Well- Cuomo apparently DID do some investigating on Freddie/Fannie:
http://www.nypost.com/seven/11082007/business/fannie__freddie_hit_in_cuomo_assess_prob_543687.htm
By JANET WHITMAN
November 8, 2007
New York Attorney General Andrew Cuomo served government-sponsored lenders Fannie Mae and Freddie Mac with subpoenas yesterday as he expands his probe into bad behavior in the mortgage business that’s behind a spike in home foreclosures.
Cuomo is investigating whether home loans purchased by Fannie Mae and Freddie Mac - the nation’s biggest investors in mortgages - were based on bogus appraisals that fraudulently inflated the value of homes.
The subpoenas come a week after Cuomo accused real-estate appraisal giant First American Corp. of colluding with Washington Mutual to slap fake values on thousands of homes to help make sure loans went through.
Cuomo said at a press conference that he believes the chicanery has gone on for more than a decade and extends far beyond Washington Mutual.
“I believe it’s widespread. I believe it’s the rule not the exception. And we’re investigating Fannie Mae and Freddie Mac and other investment banks as to the underlying practices that have allowed this to go on for so long.”
Cuomo said Washington Mutual and other banks put pressure on appraisers to provide inflated values because they were in the interest of the lenders, which would reap fees and interest but be shielded from risk by quickly selling the loans off into the secondary market.
“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,” Cuomo said.
With the inflated appraisals, buyers purchased homes for substantially more than they were worth, contributing to the current mortgage crisis.
Homeowners and investors who buy mortgage securities are the ones “left holding the bag,” said Cuomo.
Shares of Fannie Mae and Freddie Mac, which were created by Congress to make home ownership affordable for low-income folks, got hammered on the news. Fannie Mae fell 10 percent to $49.79. Freddie Mac dropped nearly 9 percent to $45.13.
The companies have agreed to retain an independent examiner to review appraisals and mortgages they purchased.
Brian Faith of Fannie Mae said, “It is against our interest to purchase or guarantee mortgages with inflated appraisals, and so it is in Fannie Mae’s interest that these appraisal practices be investigated.”
If the examiner finds they own mortgages with inflated appraisals, the lender must buy back the loans, he said.
Washington Mutual shares tumbled 17 percent yesterday after it warned mortgage losses would mount in 2008.
Interesting read.