WASHINGTON

Federal and state regulators announced a revised pact Tuesday to reshape home appraisal practices as part of an agreement with mortgage finance companies Fannie Mae and Freddie Mac.

Widespread complaints of problems with inflated appraisals and their impact on the nation's housing market led New York Attorney General Cuomo to reach an initial pact in March with Fannie and Freddie on a plan to reform the troubled industry.

The original changes, however, brought complaints from bank regulators and mortgage industry officials, who said Cuomo was overstepping his authority and said the law would harm the industry.

Fannie and Freddie, government controlled companies, own or guarantee the lion's share of new U.S. home loans and have become especially dominant after the collapse of dozens of lenders that catered to borrowers with poor credit. Any changes made by the two companies impact the entire lending industry.

"Erecting and enforcing meaningful firewalls between appraisers and lenders, and forcing Fannie and Freddie to stop working with unscrupulous lenders and brokers, are key steps in cleaning up the mortgage industry and avoiding another crisis like this in the future," Cuomo said in a statement.

The new agreement is effective May 1 and requires appraisers to abide by a six-page code of conduct that includes new rules for appraisers who work for the same companies as lenders.

The earlier version of the agreement banned the practice of in-house appraisers outright. But despite the change it is still "a good development for consumers," said David Berenbaum, senior vice president with the National Community Reinvestment Coalition, a consumer group in Washington.

During the housing boom, "we saw again and again consumers receiving inaccurate, inflated, even fraudulent appraisals," he said.

Fannie and Freddie declined to comment. James Lockhart, director of the Federal Housing Finance Agency, which regulates the two companies said the changes would "strengthen the appraisal process against the possibility of improper influence and coercion."

An Associated Press investigation earlier this year identified key failings in the nation's regulation of appraisers.

The AP found that since 2005, more than two dozen states and U.S. territories have violated federal rules by failing to investigate and resolve complaints about appraisers within a year. Some complaints sat uninvestigated for as long as four years and as a result, hundreds of appraisers accused of wrongdoing have remained in business.