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Soft Market Policy

By
Real Estate Broker/Owner with CIDER Properties
Lenders will implement the following Soft Market policy so their conventional loans can comply with Freddie Mac and Fannie Mae requirements.  Below are the criteria by category and by clicking the link below you can access the ratings by State.  Please note that the appraisal or appraisal review must cite certain conditions before this Soft Market policy will apply. This Soft Market policy does not affect FHA loans or other special financing programs as noted below. 

Impacted markets across the nation have been categorized, with Category 5 being the highest risk for declining market value and Category 1 markets currently demonstrating more stable market values. Those counties in a higher risk category are subject to additional guideline restrictions as described below. Click here to view a list of the counties currently attributed* to Soft Market categories 1-5.

The following Soft Market policy became effective January 18, 2008:

Conforming, Non-Conforming, Expanded Approval (EA), and Conventional Bond loans:

Soft Market Category 4-5 loans

Maximum financing will be reduced by 5%

Example: Maximum financing per Countrywide's Loan Program Guide allows for 95% LTV. Loans in Category 4-5 will be limited to a new max LTV of 90%.

Soft Market Category 1-3 loans

Maximum financing will be reduced by 5%, only if the appraisal or appraisal review indicates any of the following:

  • Declining Market
  • Oversupply
  • Marketing time over 6 months

For the above categories, if the loan is already 5% below the maximum allowable financing, no further reduction is required.

Home Equity**

Soft Market Category 5 loans

Maximum financing will be reduced by 10%, unless the loan is already 10% below the maximum allowable financing

Soft Market Category 4 loans

Maximum financing will be reduced by 5%, unless the loan is already 5% below the maximum allowable financing

Soft Market Category 1-3 loans

Maximum financing will be reduced by 5% (unless the loan is already 5% below the maximum allowable financing) if the appraisal or appraisal review indicates any of the following:

  • Declining Market
  • Oversupply
  • Marketing time over 6 months

Products / Programs Not Impacted

FHA / VA

Rural Housing

Bond programs using government or Rural Housing loan programs

Reverse Mortgages


Pipeline Protection

The new Soft Market Policy is effective on all loans locked after Friday, January 18, 2008. Loans locked prior to the end of day on Friday, January 18, 2008 are not subject to the new policy. Those loans must meet all pre-existing Soft Market Policy requirements and must fund by March 18, 2008.

Lock extensions may be granted as long as the loan funds by March 18, 2008 and meets all other pipeline protection rules".

Comments (2)

Matt Ratcliffe
Keller Williams Realty Brazos Valley - College Station, TX
Great post and very informative...thanks
Jan 28, 2008 01:27 PM
Enrico Pozzo
Coldwell Banker Bain - Seattle, WA
Seattle Condos, Lofts, Houseboats

Thank you Tanya.  I did not know their strategy varied from region to region.  this is very interesting and educational.

Enrico Pozzo, Coldwell Banker Bain: Seattle Condos, Lofts, Houseboats and all Seattle Real Estate Listings

Jan 28, 2008 01:33 PM