Cuomo Hits Fannie Mae, Freddie Mac With Subpoeanas
The New York attorney general subpoenaed mortgage finance giants Fannie Mae and Freddie Mac as he sought to expand his housing industry investigation by focusing on companies that package house loans and sell them to investors.
It was the second public step in Andrew M. Cuomo's probe of fraudulent house appraisals, which he says rippled across the market as overvalued mortgage loans were bundled together and sold as debt.
"If the appraisal process is broken, the loans and investments on which they are based may not be worth what investors have been led to believe they're worth," said Eric Corngold, an economic justice deputy who is leading the investigation for Cuomo.
At a Manhattan news conference, Cuomo said that Fannie Mae, of the District, and Freddie Mac, based in McLean, had agreed to enlist an independent examiner to analyze their risk practices and their dealings with embattled lender Washington Mutual.
WaMu, the country's biggest savings and loan, was accused by Cuomo last week of pressuring an appraisal company to inflate values of thousands of houses for sale. WaMu, based in Seattle, has denied the allegations, but its stock price plunged more than 17 percent yesterday as it remained the focus of intense regulatory and market scrutiny. The company said it had launched an internal investigation and that it "takes any allegations of improper practices seriously."
This year alone, WaMu has sold $24.7 billion in loans to Freddie Mac and $7.8 billion more to Fannie Mae, the two largest players in the mortgage financing industry. Authorities in New York also have subpoenaed several banks with substantial mortgage operations, Cuomo said, but he declined to name them.
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