New York Attorney General Andrew Cuomo is expected to announce on Wednesday he is examining what role Fannie Mae and Freddie Mac might have played in an alleged scheme to inflate appraisals of home values, sources familiar with the investigation said.

Cuomo has subpoenaed records at the two government-sponsored mortgage finance enterprises but is not expected to name them as defendants in a lawsuit, the sources said.

Fannie Mae stock was down 5.5 percent, while Freddie Mac was off 3.1 percent in morning trading on the New York Stock Exchange.

Cuomo, who was Secretary of Housing and Urban Development under U.S. President Bill Clinton, is scheduled to make the announcement at a news conference later in the day, his office said in a brief advisory. It provided no other details.

Fannie Mae and Freddie Mac were not immediately available for comment. Cuomo's spokesman, Jeffrey Lerner, declined to comment.

The development would be the latest outcome of Cuomo's ongoing, nine-month probe into the mortgage industry.

The attorney general's office has sent hundreds of subpoenas and has uncovered fundamental flaws in two areas of the market -- appraisals and securitization of mortgage loans, officials have said.

Last week, Cuomo sued First American Corp and one of its units for allegedly colluding with Washington Mutual Inc to inflate the appraisal values of homes.

That lawsuit, filed in New York Supreme Court, alleged that First American and its real estate appraisal subsidiary, eAppraiseIT, violated appraiser independence laws. Washington Mutual, the largest U.S. savings and loan, was not named as a defendant.

Fannie Mae stock was down $3.02 at $52.37, while Freddie Mac was off $1.53 at $47.86. (Additional reporting by Martha Graybow and Joseph Giannone, editing by Mark Porter/Maureen Bavdek)

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