Fannie Mae recently revised their declining markets policy. In a nutshell, their terms are:
Maximum 97% Loan to Value (LTV) on conventional/conforming loans regardless of the market with their proprietary Desktop Underwriter (DU)/Automated Approval, and 95% LTV maximum financing if the loan is underwritten outside of DU (manually).
You can see this here: Download the latest word on Fannie Mae's declining market policy
The issue is that while this is their latest word, it is not the last word. One of the underlying issues that consumers don't understand is that when you take out a loan with a loan-to-value greater than 80%, in general, you will be required to pay some sort of mortgage insurance. Why is that important? Because, the mortgage insurance companies are the front-line losers when these loans go south. So, many of the mortgage insurance companies have their own UNIQUE guidelines. Further, they are not providing a grandfather period. So, their guidelines are varied and dynamic and this puts a very high burden on all lenders. If a lender makes a loan at 97% but cannot get mortgage insurance b/c of a change in guidelines they are very likely going to lose a large sum of money and in many instances this is too large a price to pay from a risk/reward scenario and your loan may not close.
My final tidbit of advice or commentary is the following - if you have 10% or less to put down as a downpayment, I would strongly recommend looking at an FHA loan as opposed to conventional (Fannie Mae/Freddi Mac) loan. I believe in many instances, the overall cost will be less on a monthly basis and your risk of not closing will be all but eliminated.
As always, I'm very curious what everyone else has been hearing, seeing, and experiencing.