Fannie Mae Says We Want Less Business...well not in so many words!

On December 5, 2007 Fannie Mae announced that it will re-institute it's Maximum Financing in Declining Markets Policy.  This policy had been removed by Fannie Mae in January of 2006.  Basically, this policy will reduce the Maximum Loan-to-Value (LTV) Ratios by a pre-determined percentage if markets are considered to be soft, distressed or severely distressed.  These determinations will be made by lenders and appraisers using tools to access housing trends like the S&P/Case Shiller Home Prices Indices, the Office of Federal Housing Enterprise Oversight (OFHEO) Index, and The National Association of Realtors (NAR) Statistics, to name a few.  In addition to this,  when running a loan through Desktop Underwriter (DU) which is Fannie Mae's Automated Underwriting engine, their findings may come back with a market indicator that will automatically reduce the max LTV for that particular loan. 

This sounds pretty bad, huh?  Yes, but there are some outs.  If you can make a case that a property is not in a declining market, Fannie Mae may remove the restriction.  How?  Well your appraiser needs to be able to show reasons why a particular property does not meet the criteria.  Also, the restrictions do not apply to to rate and term refinances that have an existing Fannie Mae-owned or securitized first mortgage. 

This is just another in a long line of factors that WILL send more and more mortgage financing into government loans. 

This policy goes into effect for all loan applications dated January 15th, 2008 or later.

Your mortgage partner for life,