Homebuyers, lenders and other parties who occasionally find themselves dissatisfied with the home valuation activities of Fannie Mae and Freddie Mac will soon have an outlet for their frustrations. A letter from Edward DeMarco, the director of the Federal Housing Finance Agency (FHFA), which oversees the management of Freddie and Fannie, indicates that an online forum will be implemented within the next few weeks to allow the public to report any suspected law violations by the federally-chartered lending institutions. first tuesday will post information linking to this online forum as soon as it becomes available.

The internet complaint forum is being implemented to meet the requirements of 2009’s Home Valuation Code of Conduct (HVCC), which regulates the appraisal activities of Fannie and Freddie. The HVCC originally called for the creation of an “Independent Valuation Protection Institute,” an independent organization charged with regulating and monitoring Fannie Mae and Freddie Mac. For budgetary reasons, the FHFA has decided to create this online complaint forum as an alternative to this independent commission. [For more information on the evolving regulations behind this FHFA press release, see the July 2009 first tuesday article, The Home Valuation Code of Conduct.]

first tuesday take: In the wake of the economy’s collapse, both federal and state governments have taken steps to improve transparency, accountability and individual liability among lenders and their representatives. Some of those measures have been inadequate or misguided (like the Secure and Fair Enforcement for Mortgage Licensing (SAFE) act’s regulations, which apply to mortgage loan brokers who originate loans, rather than the lenders who control the game), but they still represent movement in the right direction.

This complaint process for review of loan management and appraisals at Fannie Mae and Freddie Mac is a welcome step toward improved lending conditions, but will it help prevent the type of misguided lending that led to disaster in the past? For it to have a large effect, borrowers will need to literally snitch on themselves when they see the possibility of accepting funds from an improper appraisal and lending program. It is one thing to expect lenders to know right from wrong, but another thing entirely to expect borrowers to police that knowledge. The FHFA’s program may well turn out to be nothing more than another “look-good” lender policing program that goes nowhere and does nothing.

Re: News Release”, from the Federal Housing Finance Agency