Fannie nixes declining markets down payment requirements
The mortgage finance giant has adopted a new, single down payment policy, doing away with its "declining markets" guidelines that required higher down payments in areas with falling home values.
(5/20/2008)
Mortgage financing company Fannie Mae has instituted a new, single down payment policy, doing away with its "declining markets" requirements.
Starting June 1, Fannie will accept up to 97 percent loan-to-value (LTV) ratios for conventional, conforming mortgages processed through its Desktop Underwriter (DU) automated underwriting system, and 95 percent LTV ratios for loans underwritten outside of DU, in all geographic locations in the United States, according to a statement from Fannie.
The new policy replaces Fannie's "declining markets" policy, which required higher down payments in markets where home prices are declining and was adopted in December.
"As another part of our 'Keys to RecoveryTM' initiative, we are today announcing that we will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," said Marianne Sullivan, senior vice president of Single-Family Credit Policy and Risk Management. "This new down payment policy reinforces our goal to support successful home-owning, not just home-buying, as we seek to bring liquidity to all communities and help the housing market recover."
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. Fannie will implement systems and operational changes over the summer to accommodate the new national policy, according to the statement.
"We are able to adopt this new, national down payment requirement, even in markets where home prices are declining, because our new automated underwriting risk assessment model DU Version 7.0 will limit risk layering and assess each loan more precisely," Sullivan added. "At the same time, we believe that equity matters, especially in this market. Down payments are a critical success factor in homeownership -- and responsible lending is good business."
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