Fannie Mae Withdraws Declining Market Policy

Fannie Mae withdrew its declining market policy today and went back to their uniform down payment requirements. This should go a long way to making mortgages more affordable and accessible to more people and help to stabilize the mortgage credit markets.

Fannie Mae had initiated the declining markets policy in January 2008 due to the falling property values across the country. To try and stem the tide of foreclosures and short sales Fannie Mae required larger down payments for properties deemed to be in a “declining market.” (See Declining Market Areas)

This was the kiss of death for many transactions and made mortgages less affordable – thereby worsening an already bad mortgage market. By reverting to their previous policy, Fannie Mae will allow people to make the minimum allowable down payment per the programs guidelines regardless of the market the property is in.

However, many lenders are not as quick to change their policies. Many lenders are not automatically changing their declining market policies in line with Fannie Mae. Over time, most or all of the lenders will fall in line with Fannie Mae’s requirements but, for the time being, down payments requirements may vary from lender to lender.