In an effort to provide stability for the housing market, Fannie Mae has reversed the tightening standards put in place last year. The sharp drop in housing prices last year prompted a sharp tightening of lending standards, which included putting down an extra 5% down payment in areas deemed "declining markets." With the reversal, homeowners can again get loans up to 95% LTV -- even in markets where prices have been falling.
Overall, this is good news at the margin, as it should allow first-time homebuyers better access to loans, and also should allow more homeowners to qualify for refinancing. Again, the Fed, government, and the agencies are all doing everything possible to stop the blood-letting in the housing market. And their efforts have without question helped what would have otherwise been a much worse scenario. Fannie Mae goes on to point out, however, that buyers still need to get Mortgage Insurance, which has become much more difficult in the current environment.
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