Well, today is the day. Loan Applications dated January 15, 2008 or later may be subject to this reinstated regulation. Freddie Mac, VA and HUD have all posted similar notifications, making Fannie Mae the last one to the table on this issue. I'm finding that with a such a wide-based and undefined criteria, not all lenders are treating the regulation the same. Most lenders are ignoring Fannie Mae's recommendation that since real estate markets are local markets, and properties in one neighborhood may have stable values, while those in other neighborhoods may not. Fannie Mae Notice 07-22 states that if an appraiser stipulates on their appraisal report that a property is located in stable market, with adequate supporting documentation, a Fannie Mae Desktop Underwriting Decision that designates a property to be in a declining market subject to a 5% reduction in the maximum loan-to-value for the program may be rebutted.

Some lenders are designating all property in the State of California and Florida to be in Declining Value Areas, others are using Zip Codes to establish these areas, some use Metropolitan Statistic Areas and others Census Tracts. Depending on the number of properties included in these methods, chances are they are not differentiating between stable value neighborhoods and declining value neighborhoods. So, in the fearful environment lenders are operating in today, they blanket whole areas unnecessarily!

I'm contacting my lender partners to find out their position on this issue, and reconsidering my business relationships with lenders:

"Thank you for your message from last night, XXXX. I appreciate the feedback, and wish all lenders were looking at the "Declining Market Areas" as specifically as your company. Those lenders that are making the decision based on zip codes alone are subjecting properties in stable neighborhoods to this rule unnecessarily. Those lenders that will not consider Fannie Mae's recommendation in Notice 07-22 to consider exceptions AND are blanketing areas improperly are lenders I'm staying away from, as I don't believe that sending my clients' files to those lenders is in the clients' best interest.   In this current market environment it is critical that brokers and lenders work togetherto serve the borrowers as best we can within the tightening criteria required by the secondary markets. Some of the steps being taken today will have long-ranging effects - such as eliminating many first time home buyers (a large demographic today, one that for the past decade plus FNMA, FHLMC, FHA & VA were trying to help) trying to enter the real estate market. Increasing their down payment requirements while forcing them to have to pay points to get their loans, merging entities and company closures thereby decreasing competitive interest rates are not the direction I believe is best for the consumer. Not all children of Baby-Boomers will be given free and clear property for their first home!   Please understand, I am NOT in favor of assisting buyers with obtaining loans they cannot afford or loans that are not suitable tools to help them reach their homeownership goals. I have done maybe 6 sub-prime loans EVER, and they were to fulfill very specific criteria for educated borrowers. I will not miss these products, as I recommended against them 99.9% of the time. I will miss the stated income loan for the self-employed borrowers who had unusual circumstances, but whose cash flow could support their mortgage payments, and hope to see that product return for them - not the "liars' loans" - when the dust settles.   My hope is that the secondary markets, regulators and elected officials will turn their attention toward educating borrowers, while establishing effective disclosure and education requirements for the lending industry - banks, thrifts and mortgage brokers alike - increasing accountability measures for those that do not comply.   I'm getting off my soapbox now, and will look forward to working with your organization toward a mutually beneficial goal of providing sustainable, quality loans to borrowers."

I'll also continue to contact my elected officials as these Bills come up addressing the real estate and mortgage industries. As professionals, we all need to stay informed and engaged in the decision making process. Please join me in this process, and contact your lending partners and elected officials. Together, we can make a difference.

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com