Fannie, Freddie Settle NY Probe

Government-sponsored mortgage giants Fannie Mae (FNM Quote) and Freddie Mac(FRE Quote) have agreed to a slew of new standards designed to prevent fraud, ending a probe of their business practices by New York Attorney General Andrew Cuomo.

The companies have agreed to each pay $12 million over the next five years to set up an Independent Valuation Protection Institute to promote accurate appraisals in the U.S. mortgage industry. They also will require lenders that turn around and sell mortgages to Fannie and Freddie in the secondary market to follow a Home Valuation Code of Conduct, designed to ensure that home appraisals are independent and accurate.

In return, Fannie and Freddie will admit no wrongdoing and Cuomo will terminate his investigation into their business practices. Cuomo, who had been investigating billions of dollars in home loans that the government-sponsored entities bought from banks, concluded that fraudulent appraisal practices are widespread in the industry and a root cause for the spike in mortgage foreclosures that are wreaking havoc on financial markets and the U.S. economy. ...