Today, I received the email link for the response letter from James Lockhart with the OFHEO:
Second, as part of a wider probe of the mortgage industry, the New York Attorney General Andrew Cuomo demanded that Fannie Mae (Charts) and Freddie Mac (Charts, Fortune 500) examine whether mortgages sold to them by Washington Mutual were for homes that had been appraised at an artificially high price.
The fear is that Fannie and Freddie might cut back on purchases and guarantees of loans from WaMu (Charts, Fortune 500). That would be a crippling blow for the bank, because the market for loans that Fannie and Freddie buy is the only part of the mortgage market that has substantial volume.
...OFHEO shares your concerns about fraudelent appraisals and their impact on the mortgage markets and homeownership. Additionally, we have a core interest in the safety and soundness of the Enterprises (GSEs). These allegations of appraisal fraud are a serious matter to the Enterprises and OFHEO and require vigilant attention by all relevant government agencies. Active and early consultation is appropriate in such circumstances.
After reviewing these materials, I feel that you and your staff may not fully understand the differences between the mortgage-backed securities (MBS) issued by the GSEs and those issued by other entites. In particular, unlike the issuers of private label MBS, when Fannie Mae or Freddie Mac issues an MBS, they retain the credit risk on the underlying mortgages by guaranteeing repayment to MBS holders...