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Fannie, Freddie Overturn 'Declining Market' Policies
Responding to concerns from NAHB and other housing organizations, Fannie Mae and Freddie Mac announced last week that they are overturning their policies requiring higher downpayments on home mortgages in areas where house prices are falling.
At its spring meeting on May 3, the NAHB Board of Directors called for Fannie Mae and Freddie Mac to repeal their recently imposed declining market policies, which require a reduction of 5% in the maximum financing available for various mortgages in markets where housing prices have been eroding.
NAHB argued that these policies were exacerbating an already soft market by shutting out too many potential buyers.
Fannie Mae announced that starting on June 1 it will implement a new national policy on downpayment requirements that will allow up to 97% loan-to-value ratios (LTVs) on mortgages processed through its automated underwriting system, Desktop Underwriter (DU), and 95% for loans written outside of that system. Higher LTVs will be allowed on programs offered through state and local housing finance agencies or nonprofit groups.
Freddie Mac also announced that it was eliminating its declining markets policy, effective June 1. For purchases and no cash-out refinances, the maximum LTV is now not required to drop below 95% even if the mortgage is for a property in a declining market. In addition, Freddie Mac will allow up to a 100% LTV on its Home Possible mortgages for low- and moderate-income borrowers and borrowers in underserved areas.
After Congress and the Department of Housing and Urban Development moved to increase the number of homes that could be purchased by the government-sponsored enterprises, “both Fannie Mae and Freddie Mac have taken a number of steps aimed at increasing capital and reducing mortgage credit risk, which have actually increased the cost and reduced the availability of mortgage credit for borrowers who are most in need of GSE support,” NAHB’s resolution noted.
The NAHB resolution also called on the GSEs to repeal new delivery fees, which so far have not been changed.
For more information, e-mail Michelle Hamecs at NAHB, or call her at 800-368-5242 x8425.
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