Right on, a step in the right direction. I have been shocked that Fannie Mae and other banks have made is so much harder to qualify for a loan right now. They should have made is harder in 2005 and 2006, as the bubble grew. Take away demand and you avoid the imbalance. But they didn't.
It now seems that they intentionally push property values lower by making it harder to qualify for mortgages over the past year. Now that property values have dropped, the risk is much lower for new borrowers and the banks. Yeah, property values have dropped from 20 to 60% in the metro Phoenix area since the peak. So, now that prices are lower they are reacting by reducing the down payment requirement. This is great news. We need to continue to add demand to the market and this move will add demand. It is all about the balance of supply and demand. That is what controls everything, I mean everything.
Demand has been growing here in the valley. The 4 week moving average of valley home sales hit 1,220 last week, the highest since May of 2006. However, we still have over 45,000 single family homes listed for sale. With over 2,500 foreclosures last month, we know their is and will continue to be an abundant supply of homes. Every little bit we can do to add to demand will help us move towards a supply and demand balance more quickly.
Thank You Fannie Mae! What's next! How about the JUMBO market, that is our biggest problem here in Scottsdale.
Here is the article from the AP about Fannie Mae:
Fannie Mae reduces downpayment requirements
May. 16, 2008 09:13 AMAssociated Press
WASHINGTON - 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 mortgage finance company said Friday it will require minimum down payments of between 3 percent and 5 percent for all loans that 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 a housing market can differ widely - even in the same zip code - in a particular neighborhood can differ widely, neighborhoods with healthy 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 in a statement.
A Freddie Mac spokesman said the McLean, Va.-based company earlier 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.
Congress created Fannie and Freddie to pump money into the home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street. Together they hold or guarantee about $5.1 trillion in home-mortgage debt.
Fannie Mae shares fell $80 cents, or 2.60 percent, to $29.45 in morning trading. Shares of Freddie Mac fell 70 cents, or 2.57 percent, to $26.57.
Saturday, May 17, 2008
FANNIE MAE TO REDUCE DOWNPAYMENT REQUIREMENTS
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