FNMA -Ditching the declining markets policy?

[Roy Courtney]

http://www.uwsa.com/uwsa-usdebt.html

Never fear, our government is here!

 

[Julio E. Sune Jr. (FL)]

So.....FNMAE and Freddie have caved in to the old "let's produce loans...regardless" syndrome.......

But wait......Ahhhhh!!!! here is what MGIC had to say.......
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Asked if MGIC, the largest insurer, might relax its policies in light of Fannie's and Freddie's announcements, senior vice president Michael J. Zimmerman said in effect: No way!

"We're not contemplating any changes," he said.

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So.........Back to square one.......Ohhhhh.....yes!!!! There is another solution...FHA!!!!

Ladies and gentlemen.......brace yourselves!!!!!!!!!!!!!!!

 

[Mike Garrett RAA]

Shutting down the mortgage industry isn't a solution to the problem. Proper underwriting, qualification, and appraisal is.

 

[john snyder]

Where is Jimmy Stewart when we need 'em. Its a wonderful life.

jbs

 

[xmmcsmielr]

Back when prices were skyrocketing in Tucson, there was a cabal of underwriters who would reject reports with "increasing" checked and with upward time adjustments.

One of those people actually tried to instruct me to remove the upward time adjustments, so she could have "a FNMA compliant appraisal".

I forwarded the section from FNMA's Handbook for Appraisers that details market conditions and instructions that an appraiser MUST report changing market conditions. No avail. I heard the lender hired another appraiser, who checked "stable", did not make any time adjustments and complied with the underwriter's uninformed stance about time adjustments.

Now, of course, LOs are telling appraisers not check "declining", so loans will zing through without any problems, even though there is overwhelming market data ov declining prices.

What is the problem? Why don't underwriters read what FNMA guidelines say?

And, more importantly, why are so many appraisers complying by only checking "stable"?

 

[Mike Garrett RAA]

Because they have never had a USPAP class!

 

[ghrousseau]

It's official with Fannie Mae

Here is the link to the Fannie Mae lender announcement:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0810.pdf


Here is a paraphrase from a Wells Fargo announcement I saw today:

"Fannie Mae Declining Market Changes Effective 6-1-08 per Announcement #08-10 (to view the entire announcement, go to www.efanniemae.com and click on the link to "Review the Lender Announcements" under Down Payment and Jumbo-Conf Announcements):

FNMA Replacement of Maximum Financing Policy

In Announcement 07-22, Maximum Financing in Declining Markets published December 5, 2007, Fannie Mae reinstated a policy that required the lender to reduce the LTV ratio and combined LTV (CLTV) ratio by five percentage points when the property is located in a declining market. The new national down payment policy now supersedes the maximum financing policy. Lenders are no longer required to make a downward adjustment to the LTV, CLTV, or home equity CLTV (HCLTV) based on the location of the property. The replacement of this policy applies to all loans delivered to or guaranteed by Fannie Mae, including loans underwritten with DU and manually underwritten loans. The message currently issued by DU that indicates the property is in an area of declining home prices or an area where it is difficult to assess home values will be removed in a future release and should be disregarded as of June 1, 2008. Lenders should continue to carefully review appraisals to ensure that the appraiser has appropriately analyzed property value trends and overall market conditions to arrive at the value provided. Refer to Fannie Mae’s Property and Appraisal Guidelines in part XI of the Selling Guide.

Freddie Mac Declining Market Policy Changes (to view all of their recent announcements in their entirety, go to www.freddiemac.com/singlefamily and click on the links under What's New on the right hand side of the page):

Elimination of Freddie Mac's Declining Markets Policy
May 16, 2008 Advisory E-mail Message to Seller/Servicers
Freddie Mac is committed to protecting borrowers in these challenging times and providing you with clarity of our loan purchase requirements. This includes our declining markets policy, which was intended to aid borrowers, lenders, and the industry in the current environment. However, through your feedback we understand the implementation of industry declining markets policies has created confusion. As a result, today Freddie Mac is announcing we are eliminating our declining markets policy.


Freddie Mac is also following suit. What this means, is the arbitray practice of automatically reducing the max LTV by 5% for properties identified in declining markets will be eliminated. This is one of the reasons so many of you saw a big drop in May of business. FHA was not affected before, only jumbo and conventional conforming. We haven't heard anything yet from MGIC, Radian, or GE mortgage insurance. The PMI companies are in a catch 22..................they have huge losses, but they still need to generate revenue. It will be interesting to see if they change their current position. Usually they follow the market and Fannie/Freddie. If one MI companies changes they will all change. I guess they have to see if it makes sense at this point to underwrite new MI.

FYI