Daily Real Estate News May 16, 2008
Fannie Mae will no longer require borrowers to put up an extra 5 percent down payment when purchasing homes in areas deemed "declining markets," the country’s largest secondary mortgage market company said Friday.
Fannie Mae had been hearing concerns from REALTORS® and others for months that its declining-markets policy was bad for the housing market because it discouraged consumers from buying homes in markets hardest-hit by foreclosures.
"It stigmatized communities with lower sales and prices," said Dick Gaylord, president of the NATIONAL ASSOCIATION OF REALTORS®.
NAR met several times this spring with Fannie Mae officials and sent letters reflecting members' unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement Friday.
Fannie Mae's announcement comes as more than 8,000 REALTORS® are gathered in Washington, D.C., where Fannie Mae is headquartered, for NAR's 2008 Midyear Legislative Meetings & Trade Expo.
Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.
“This new down payment policy reinforces our goal to support successful home-owning,” says Marianne Sullivan, Fannie Mae's senior vice president of credit policy and risk management for single-family homes.
The new policy takes effect June 1.
— By Robert Freedman for REALTOR® magazine online
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