I wanted to provide you with some great news that surely should add some hope in the air and put a few more thousand families a little bit closer to homeownership. Many of you might recall last December, when virtually all of Northern Virginia (and over ½ of the country), had been declared as being in a “Declining Market.” This had been a point of contention for many consumer groups, including the National Association of Realtors, because both Fannie Mae and Freddie Mac initiated a “Maximum Financing Policy” in these markets that required most buyers to come up with at least a 10 percent down-payment. That killed a lot of potential deals. This policy even affected those with a sterling credit score.
As of June 1, 2008, as little as 3 percent down-payments may be made on conventional, conforming mortgages if you use the Desktop Underwriter, automated underwriting system, throughout all of the United States. This, in conjunction with Fannie Mae’s patented “Community Seconds” that allows a borrower to take a 2nd trust up to 105% backed by a state or local housing agency or an employer; as well as Fannie Mae’s patented “My Community Mortgage” permitting down-payment assistance from gifts or grants, should provide further solutions to our current dilemma of affordability.
Let’s take a portion of Fannie Mae’s Media Release to drive home my point, “Since the housing correction began, Fannie Mae has expanded its mortgage guaranty business to serve the market's urgent need for stability, liquidity and affordability. The company also undertook steps to help protect borrowers, manage the increased credit risk in the market, and fortify the company's capital position. Among these steps, the company has continued to assess and establish new pricing, eligibility and underwriting criteria for its business that more accurately reflect the current risks in the housing market and guard against the potential for foreclosure.”
Over the last year, but especially since last August, the entire Housing and Financial World has struggled to make sense and get out of a few years’ worth of unwise lending practices. What I have just described to you is not a panacea to the current credit crisis. Rather, it merely is the next phase of a behemoth undertaking by one part of the jigsaw puzzle that will ultimately help to get all of us through the current housing predicament. This is not a perfect fix; undoubtedly there will be credit score requirements, more expensive PMI (property mortgage insurance) if you take out more than 80%, other possible obstacles. However, the glass half full is my perception of choice. The question for us to ask is – “Is it part of the problem, or part of the solution?” Something is better than nothing.
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