Marianne E. Sullivan, Sr. VP of Fannie Mae's Single-Family Credit Polity and Risk Management division, issued a Selling Guide Announcement 07-22 on December 5, 2007.
"Current home price trends indicate that home values continue to decline in many markets across the country. As a result, and based on our continued monitoring of loan performance, Fannie Mae is reinstating a policy to restrict the maximum loan-to-value (LTV) ratio and combined loan-to-value (CLTV) ratio for properties located within a declining market to five percentage points less than the maximum permitted for the selected mortgage product."
"The reinstatement of the maximum financing policy and the other changes outlined in this Announcement are necessary in light of current market conditions. These policies are effective for all loans delivered with application dates on or after January 15, 2008."
This Announcement:
- Establishes restrictions on the maximum financing for properties located in declining markets;
- Encourages lenders to employ additional tools and processes to validate housing trends; and
- Establishes criteria for exceptions to the maximum financing policy.
Fannie Mae says:
Fannie Mae strongly encourages lenders to use supplemental sources and tools to independently assess current housing trends, unless the appraisal indicates that the subject property is located within a declining market.
When the appraisal notes that the subject property is in a declining market, the maximum financing policy must be applied.
Fannie Mae strongly urges lenders to implement processes and apply supplemental sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal.
From Fannie Mae announcement 07-22:
Fannie Mae strongly encourages lenders to use supplemental sources and tools to independently assess current housing trends, unless the appraisal indicates that the subject property is located within a declining market.
When the appraisal notes that the subject property is in a declining market, the maximum financing policy must be applied. When the appraisal does not indicate that the subject property is located within a declining market,
Fannie Mae strongly urges lenders to implement processes and apply supplemental sources and tools to validate current housing trends and not rely solely on the information reflected in the appraisal.
There are several services available that can be used by lenders and appraisers to assess current housing trends, including:
- SLAP/Case-Shiller Home Price Indices. These indices rely on purchase price and related information obtained from county assessor and recorder offices.
- Office of Federal Housing Enterprise Oversight (OFHEO) For indications of market decline, lenders should use the index based on purchase loan data. Purchase-only indexes at the state level can be found at http://www.ofllco.gov/download.asp .
- National Association of REALTORS" (NAR' statistics on changes in median prices. NA R releases statistics on state-by-state existing-home sales and metropolitan area median home prices each quarter.
In addition, there are several other entities that provide reports that track current home prices on a subscription/fee basis and may be used at the lender's discretion.
Recent Comments