New York Attorney General Andrew Cuomo was wrong to file subpoenas against Fannie Mae and Freddie Mac without consulting their federal regulator and may have overreached his
authority, the regulator wrote in a letter Thursday.
Cuomo announced on Wednesday that he had served the two mortgage finance firms with subpoenas in an investigation into what Fannie and Freddie might have known about possible home value inflation.
In his letter, Lockhart questioned the logic of Cuomo's allegations that Fannie and Freddie might have an interest in allowing inflated home appraisals.
The mortgage finance companies "have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals," he wrote.
"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 entities," the letter continues.
Fannie and Freddie are known as government-sponsored enterprises because the publicly traded companies hold federal charters to promote home ownership.
In another portion of the letter, Lockhart questions whether Cuomo's office even has the authority to make demands of Fannie and Freddie. On Wednesday, the attorney general said that he won a promise from the GSEs to examine their mortgage investments and to identify any possible fraud and had warned them against failing to comply. In particular, Cuomo identified Washington Mutual as the source of some questionable loans.
Lockhart questioned Cuomo's "demand that two federally chartered and federally regulated Enterprises cease doing business with a federally chartered bank, which you have not charged or subpoenaed, unless certain conditions stipulated by your are met."
In the letter, Lockhart requests a meeting with Cuomo to discuss these issues.