Fannie Mae drops ZIP code policy
By Alan Zibel, Associated Press
Friday, May 16, 2008
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 Federal National Mortgage Association said Friday it will require minimum down payments of 3 percent to 5 percent for all loans 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 says the move is part of its effort to help resuscitate the flagging mortgage market.
Fannie Mae and its smaller sibling, Freddie Mac, had been under intense pressure to relax lending policies that had been tightened in recent months as foreclosures and defaults skyrocketed.
Richard Gaylord, president of the National Association of Realtors, said in an April letter to Fannie Mae that because the health of the housing market in a particular ZIP code can differ widely, neighborhoods with strong housing markets are often stigmatized.
Gaylord applauded the decision on Friday.
"These new policies will help stabilize the credit markets, which will help encourage buyers to come back into the housing market," he said.
A Freddie Mac spokesman said the McLean, Va.-based company 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.
Requirements to be the same for all loans, in all neighborhoods
*Minimum down payments of 3 percent to 5 percent will be required for all loans that Fannie Mae guarantees. That replaces a previous policy that required a higher minimum if the loan was for a home in a ZIP code with declining real estate prices.
* Potential homeowners approved by the company's automated computer program will be able to borrow up to 97 percent of the value of the property. Other loans will be accepted with loan-to-value ratios of up to 95 percent.
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