Fannie Mae eases downpayment rules
TEXT OF STORY
KAI RYSSDAL: Fannie Mae, that’s one of the big government-backed mortgage financers along with Freddie Mac, it tried to jump-start the flagging real estate market. Under pressure from realtors and from community development advocates, Fannie has dropped the policy that required higher downpayments in neighborhoods where home prices were falling.
Our Washington Bureau Chief John Dimsdale has that story.
JOHN DIMSDALE: Last December, Fannie Mae tried to stem foreclosures by adding a downpayment premium on homebuyers in ZIP codes where home prices were falling. Community activists, like Rob Breymaier of the Oak Park Regional Housing Center outside of Chicago, complained that Fannie’s policy was discriminatory.
RON BREYMAIER: It created incentives for people to avoid one neighborhood and move to another because they would not have to pay the same amount down on a similar house with similar credit.
And realtors said Fannie’s higher downpayments were chasing too many potential homebuyers out of the market. Today, Fannie said it will start funding mortgages anywhere in the country with downpayments of as little as 3 percent. Marianne Sullivan is a senior vice president at Fannie.
MARIANNE SULLIVAN: We’re doing it to be consistent. One of the things that we found is that there is uncertainty about how much equity a borrower had to have in a transaction.
Allan Mendelowitz is on the Federal Housing Finance Board. He says the lower downpayments increase the risk that homebuyers could get in over their heads. But he says Fannie’s still not taking on as much risk as private lenders did when they pushed borrowers into adjustable-rate mortgages.
Allan Mendelowitz: You’re still dealing with fundamentally good borrowers. Folks who are taking out mortgages that are not going to stick them with unsustainable mortgage payments because they’re fixed-rate rather than adjustable rates that could jump up in two years.
Fannie’s across-the-board downpayment policy takes effect June 1st.
In Washington, I’m John Dimsdale for Marketplace.
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