FNMA -Ditching the declining markets policy?

[panappr]

OK maybe we're in the middle of a meltdown, which could last into next year, enough said. So now realtors are complaining across the country that the new FNMA policy which requires an additional 5% down in a declining market area is to much, and FNMA is caving in? Already?... and we haven't even determined the root cause of the meltdown (officially) and they are back to 3% down only. Realtors seem to have an in with FNMA in order to accomplish their agenda. Maybe they threatened them.

http://www.inman.com/news/2008/05/16/fannie-mae-ditching-declining-market-policy

 

[Mike Boyd]

So now, Fannie Mae/Freddie Mac loans will be more competitive with FHA loans. I think this is simply a means to compete with FHA and absorb the market that will end next January unless FHA extends their higher loan limits beyond that time limit.

 

[Elliott]

Maybe Fannie is planning on that capitalization (authority) injection from Congress
(the $300 Billion Housing Bill), that piggy backs on FHA, damm the torpedos,
full speed ahead.

 

[Mztk1]

I've heard speculation over the past month that the real estate market had hit bottom. Part of the reason it went into a tailspin is because a lot of money and purchasing power were sucked out.

I think this is good timing and should help matters in terms of the amount of business we see.

 

[TJSum]

I wonder if the declining box notation will affect the loan in any fashion? Will all the static cease now for using that box, or will there still be reasons to pressure an appraiser not to use it. ???

 

[hglenbetts]

Don't know if I read it here or somewhere else, that even though Fannie is canning the 5% hit, the mortgage insurers are not. So, unless the government also gets into the mortgage insurance business, (wait, isn't that what FHA is???) lenders will will still need to see the extra 5%.:new_2gunsfiring_v1:

 

[ghrousseau]

There are major changes to DU and LP coming out next week. Those are the two underwriting scoring engines for Fannie Mae and Freddie Mac. I'll post up when we get the official changes, but I believe that they are addressing declining markets in this announcement.

On a side note: The new Maryland mortgage law goes in effect as of June 1, 2008. Stated income loans are basically no longer allowed in the state of Maryland for residential properties. We received an investor bulletin from BB&T today stating they no longer offer any stated income or stated income/verified asset loans in Maryland. All other major investors will likely follow. Also, the new law has the following provision for mortgage fraud:

"The new Maryland laws also make mortgage fraud a felony punishable by up to a $100,000 fine and 20 years of imprisonment, plus a private right of action for victims to recover up to three times their damages. The real estate may be seized by the state (although the Lender’s interest is protected)."

It will be interesting to see the impact on this in the market. I don't know if other states will follow with similar type laws or not.

 

[NC Old Guy]

Have had several in past couple of weeks that were maked as a "declining market" where I've had follow up "pressure" from the buyer's agents because I was keeping their needy client from buying the house. Why? Because the credit union is asking for extra X% down (or maybe at least something down). I put the exact data in the report, how it was calculated, and how it can be replicated. First one saw it, read it, "but, but, but...these are nice folks". The second one wrote--"Well, if you looked at this price range, you'd see that while sales have fallen, the average price within the range has gone up." I thought, now what did I miss. Went back & checked his price range. About fell out of my chair laughing. He was right--BUT THE $/SQFT, which Realtors almost always use for any argument on value & not mentioned in this case, ACTUALLY FELL ABOUT 10%. Larger homes were now selling in that price range so over the approx $60K range, the avg price did go up. Next paragraph was how didn't have a declining market just because the current avg list price in the range was less than the avg sales price. And everyone knew the current slump had nothing to do with the intrinsic value of homes but was created by there not being enough buyers because they couldn't qualify, and on, and on, and on.

Called the lender, talked with them about the letter (which they hadn't read yet) & asked if they really needed a response. "Not likely"

So, there is an impact but dang, it is what it is.

 

[hastalavista]

... and we haven't even determined the root cause of the meltdown (officially) and they are back to 3% down only.

(my bold)

Haven't we? Well, you did say officially, so I have to agree with you there.

Unofficially, I'd say the root cause was poor lending/underwriting standards- and I'm not alone there. I would include as a poor standard the lack of an equity requirement from the borrower on a purchase or refi.

If the stigma of foreclosure has been diminished (and I think it has), how does a lender incent or compel a borrower to continue to service a loan that is larger than the asset behind it? Here's an idea :icon_idea:: Why not have the borrower maintain an equity stake so they have some skin in the game too? I guess that idea is too old fashion in the new world order of laid-off risk (sure it is!).

 

[moh malekpour]

The 3% down is for desktop underwriting. The manual underwriting still requires 5% down but does the FNMA 5% or 3% downpayment still requires the PMI? If it does, the PMI still requires 5% or more downpayment regardless of what is the FNMA downpayment or declining policy. The only way to get a loan with 3% downpayment is the FHA loan which is an automatic insured loan in which the insurance fee is part of the loan payment and there is no declining policy of the loan.