Fannie Mae recently announced that it is reversing a December 2007 decision that would require higher down payments in markets where home prices are declining. Had Fannie Mae not changed this policy, every county in Massachusetts, except Franklin County, would be considered a “declining market”.
Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States
The new national down payment requirements of 3 or 5 percent will apply to loans for purchase of single-family, primary residences. Down payment requirements will vary for other occupancy, property and transaction types. The company will implement systems and operational changes over the summer to accommodate the new national policy.
Among the changes in response to current market conditions, Fannie Mae adopted a "Maximum Financing in Declining Markets Policy" in December 2007 that restricted the loan-to-value ratios on properties in markets where home prices are declining, essentially requiring higher down payments in these markets. However, these changes ended up restricting access to credit and interfering with the economic stimulus bill that President Bush signed in February that increased the conforming loan limit.