Declining Market Penalty Over at Fannie Mae

The 5% increase in down payment penalty for properties in designated "declining markets" is being scrapped by Fannie Mae. This penalty was enacted against homes that were located in areas identified as "declining markets," and many in the industry, including NAR, criticized the policy. They believe that it stigmatized areas even more, thus causing greater price declines.

Marianne Sullivan, Fannie Mae's senior vice president for single-family credit and risk management, said the policy reversal was possible because of improvements to the company's automated underwriting system, allowing it to "assess each loan more precisely."

Private mortgage insurers do not have to change their policies, and they may choose to continue with the heavy restrictions on certain areas or property types...such as condos in Florida.