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The Federal Trade Commission has approved a staff letter to the Federal Home Loan Mortgage Corporation (“Freddie Mac”) on its proposed settlement agreement with the New York Attorney General and the related Home Valuation Code of Conduct.

On March 3, 2008, the New York Attorney General announced settlement agreements with Freddie Mac, the Federal National Mortgage Association (“Fannie Mae”), and the Office of Federal Housing Enterprise Oversight, the office within the Department of Housing and Urban Development that oversees Freddie Mac and Fannie Mae. Pursuant to the agreements, beginning on January 1, 2009, Freddie Mac and Fannie Mae will no longer purchase single-family mortgage loans, other than government-insured loans, from mortgage originators that do not agree to adopt the Home Valuation Code of Conduct with respect to such loans. The code provides for various restrictions, prohibitions, and requirements regarding appraisal reports used to secure mortgage loans.

Based on a request by Freddie Mac for public comments on the code, staff of the Commission’s Office of Policy Planning and the Bureau of Economics prepared the letter, which expresses support for proposals such as those contained in the code to protect the independence of appraisals and the integrity of the lending process, but raises concerns regarding the potential effect of certain provisions in the code on competition and consumers in the appraisal and mortgage lending markets.

The FTC vote approving the letter was 4-0. It was sent to the Federal Home Loan Mortgage Corporation on April 30, 2008.

Copies of the letter can be found as a link to this press release on the Commission’s Web site. (FTC File No. V080011; the staff contact is Maureen Ohlhausen, 202-326-2632)