The Housing Chronicles Blog: FannieMae lowers down payments to 3-5%

Saturday, May 17, 2008

FannieMae lowers down payments to 3-5%

After instituting higher down payments for borrowers in areas of declining home prices, FannieMae has reversed itself, and now plans to require just 3% to 5% in order to help loosen the tight mortgage market. From a article:

Fannie Mae is doing away with higher minimum down-payment requirements for borrowers in parts of the country where home prices are dropping.

The government-sponsored mortgage finance company said Friday it will require minimum down payments of between 3% and 5% for all loans that it guarantees. That replaces a December policy that required a higher minimum if the loan was for a home in a zip code with declining real estate prices.

Washington-based Fannie (FNM, Fortune 500) says the move is part of its effort to help resuscitate the flagging mortgage market...

Richard Gaylord, president of the National Association of Realtors, said in an April letter to Fannie Mae, that because the health of a housing market can differ widely -- even in the same zip code -- in a particular neighborhood can differ widely, neighborhoods with healthy housing markets are often stigmatized...

A Freddie Mac spokesman said the McLean, Va.-based company earlier this month adjusted its policies to make 5 percent down payments available in declining markets. Rather than defining those markets by zip code, Freddie Mac allows appraisers to make that determination, he said.

The announcement comes as lawmakers near a bipartisan agreement on a housing bill that could bring stricter regulation for the two companies. Senators are considering tapping a fund drawn from Fannie and Freddie's profits to pay for a new foreclosure-prevention program.

Congress created Fannie and Freddie to pump money into the home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street. Together they hold or guarantee about $5.1 trillion in home-mortgage debt.

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