A March agreement between Fannie Mae (FNM), Freddie Mac (FRE) and New York Attorney General Andrew Cuomo on appraisal practices is coming under fire by Senate Republicans, sources told Housing Wire Wednesday afternoon. The so-called Home Valuation Code of Conduct, or HVCC, has been widely attacked by appraisers as one-sided and harmful to the industry, as well as lacking proper controls that are really needed to help ensure appraiser independence; it’s also variously been characterized as a state-level power grab by industry trade groups and other Federal-level regulators who say they weren’t involved in the process. American Banker reported Wednesday that a possible amendment that would have essentially upended the agreement, backed by Senator Elizabeth Dole (R-NC), was never introduced or considered in yesterday’s Senate Banking Committee mark-up session of a housing relief package. (See earlier coverage). Dole’s amendment would have specified that appraisal rules must be set federally, rather than at the state level. The decision to pull the amendment from debate came as a small surprise to a few observers on Capitol Hill that spoke with Housing Wire on condition of anonymity. “I thought this was at least going to be negotiated, even if I didn’t think it would be added in,” said one source, an industry lobbyist. “I’m not sure why she [Dole] didn’t pull the trigger.” Democrats’ reception to the proposal has been predictably cool thus far. An earlier American Banker story from Tuesday carried the reaction of Senator Chuck Schumer (D-NY):

“This would snatch defeat from the jaws of victory in the fight against predatory lending practices,” the Democrat said in an e-mail to American Banker. “This settlement was a major breakthrough in rooting out the inflated appraisals that fueled the subprime mortgage mess. An attempt to totally undo this deal would represent a step backwards.”

Cuomo has characterized the agreement as an attempt to “clean up appraisal fraud in the mortgage industry,” but banking representatives said the agreement will instead have unintended consequences for borrowers and the industry alike. Both Bank of America Corp. (BAC) and Wachovia Corp. (WAC), in particular, have said they oppose the current HVCC agreement. Terry Franscisco, a spokesman for BofA, has said in published reports that the HVCC is “overly broad” and would have “unintended consequences” for borrowers — namely higher mortgage costs — as currently constructed. (The bank does support the spirit behind the agreement, however.) For its part, Wachovia has suggested that it already has policies and procedures in place to ensure independent appraisals, and argued that the agreement would have the effect of pushing good appraisers out of the business. The committee’s ranking Republican, Senator Richard Shelby (R-AL), has suggested support for the bill, and suggested the committee take up the debate, according to media reports. Whether the Senate will ultimately take up the appraisal issue “is tough to predict at this point,” Housing Wire’s source said. Disclosure: The author held no positions in the publicly-traded firms mentioned in this story when it was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.