The Declining Market Debacle
“Declining Markets” have been an increasing concern with practitioners in the past year, and it seemed to be getting worse. However, NAR has stepped up the plate and helped the Realtor by wrestling with Fannie Mae.
“Declining Markets” have been a huge issue in that a buyer making an offer, can be required to bring an additional 5% of the sales price to the table, even if the home appraises for the agreed sales price. The appraiser conducting an appraisal can “predict” the future housing market and may note on the appraisal that the market in the area of the subject property is probably going to be worth less in the near future. When the appraiser looked into their crystal ball and made this predication Fannie Mae would require the additional down payment to protect themselves, and has ruined many transactions for buyer and sellers, where the buyer simply doesn’t have additional funds to get to closing.
Self Serving Policy
This was never a consumer protection; this was simply Fannie Mae protecting it’s investments. In and of itself there is nothing wrong with protecting one’s investments; but this was a policy that existed even if there was evident equity in the property.
NAR President Dick Gaylord said “It stigmatized communities with lower sales and prices.”
NAR Does What It’s Members Expected
REALTOR Magazine reported the following:
NAR met several times this spring with Fannie Mae officials and sent letters reflecting members’ unease with the policy. “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed,” Gwen MuseEvans, Fannie Mae vice president for credit policy and controls, said in a statement Friday.
Under the policy change, borrowers can get loans up to 95 percent loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90 percent to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.“This new down payment policy reinforces our goal to support successful home-owning,” says Marianne Sullivan, Fannie Mae’s senior vice president of credit policy and risk management for single-family homes.
The new policy takes effect June 1.
I am glad to see NAR get results in this arena. This was becoming a serious concern for both agents and consumers in many areas. Gwen MuseEvans, a Fannie Mae VP also reportedly said “We heard the concerns of NAR and we reviewed and determined that changes in our policy were needed.”
This is a great change and will help many people in the future. I am happy that practitioners and consumers will get to see direct results from NAR’s involvement.
