In the clearest challenge yet to a proposed appraisal management agreement reached in March by New York attorney general Andrew Cuomo and home finance giants Fannie Mae (FNM) and Freddie Mac (FRE), Comptroller of the Currency John Dugan has sent a letter calling on Office of Federal Housing Enterprise Oversight director James Lockhart withdraw the appraisal pact. The letter, dated May 27, characterized the so-called Home Valuation Code of Conduct (or HVCC) as having "adverse consequences ... for the safe, sound, and efficient operation of national banks' residential mortgage lending activities, as well as for the cost of mortgage credit to consumers." Republicans in the Senate have been mulling a Congressional challenge to the appraisal pact as well, on the grounds that the proposal violates or attempts to supsercede federal law. Dugan and other federal regulators have expressed their displeasure at what they see as a "power grab" by Cuomo's office, after the state AG didn't involve federal entities in crafting the original appraisal pact.
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"The OCC endorses the principle that real estate appraisals must be conducted free from influence or coercion by any party," Dugan writes in the letter. "But this objective should be achieved directly ... not by dictating the corporate and internal organizational structures of lenders." Dugan argued that the HVCC "directly conflicts with ongoing federal efforts," as well as complex legal issues that have yet to be addressed. Cuomo's office has been steadfast in its insistence to hold to the terms of the agreement, despite growing pressure from numerous industry groups and federal regulators. It's unclear if Tuesday's letter from Dugan will soften the stance of the AG's office. Calls to the New York attorney general's office seeking comment were not immediately returned by the time this story was published. OFHEO did not have an immediate comment available to the press.