I have been trying to write a Post all week, to announce the latest change in the Lending Industry, but this has been one of those crazy weeks that time just did not allow. But I guess it is better late than never, and hopefully this will help you to understand why some area’s of the country might start to see a tightening on 100% financing in their area.
As of last Monday July 22nd, Fannie Mae began to incorporate a new message in their Automated Underwriting (DU) version 5.7 feedback related to declining property values. Starting on July 22nd Fannie Mae will require a reduction in the maximum Loan-To-Value (LTV) of 5%, if the property is termed “Declining Market” on the appraisal section of the “Fannie Mae Underwriting Findings”
Fannie Mae states that “if a property is located in a market in which Real Estate Values are declining, the lender should offer financing at Loan-To-Value ratios (LTV, CLTV, and HCLTV) that are 5% below the maximum allowable ratios. However, if the refinance transaction relates to an existing Fannie Mae-owned of Fannie Mae-securitized mortgage, the lender may offer financing at the stated maximum Loan-To-Value ratio (provided that there is no subordinate financing including a home equity line of credit).”
What does all this mean? What it means to me is that if an appraisal states that a property is located in a market that is deemed to be in a “Declining Market”, then the maximum Fannie Mae backed loan that can be done is 95% LTV (5% downpayment). This has the potential of having a major impact on "First Time Homebuyers" since they are the ones that are most likely to require 100% finance. To the best of my knowledge this will not affect Connecticut very much, but in Florida this could be huge.
My advice is to talk to your Appraisers to find out what areas of your State might be affected by this change, so that you do not get caught off guard. I will try to continue to keep the members of AR aware of changes as they are made know.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
I continue to hear Realtors talk about their Buyers getting to the Closing Table and their Interest Rate is different from what they were originally told. In a day where information is available at a click of a mouse button this should never happen. Buyers need to take the time to educate themselves before they make the most expensive purchase that they have ever made in their lives. If they do, or we who are helping them make that purchase provide them with the necessary advice, an Interest Rate change without their prior knowledge would never happen. Let me explain why this should never happen.