Current home price trends indicate that home values continue to decline in many markets across the country, including eastern Massachusetts, Cape Cod and the Islands. What does this mean?
When a property is located in an area that has been identified as in a declining market, Fannie Mae (FNAM) requires the lender to offer financing at loan-to-value (LTV) and combined loan-to-value (CLTV) ratios that are five percentage points below the maximum ratios allowed for the selected mortgage product.
What this means is, if a buyer is purchasing a property in a declining market and wants to put just 5% down (95 LTV), s/he will need to come up with another 5% for the down payment - for a total of 10% down. Instead of doing a 95 LTV, the maximum mortgage amount they'll be able to do is 90% of the purchase price of the home.
Appraisers are required to note whether a property is in a declining market or not. And, even if the appraiser doesn't make notation of it, mortgage lenders are also required to make due diligence to validate current housing trends and not rely solely on the information reflected in an appraisal. The application of the maximum financing in a declining market policy will not apply when the borrower has an existing Fannie Mae-owned or securitized first mortgage and is requesting a new limited cash-out refinance mortgage.
When the lender becomes aware that a property is in a declining market, the LTV for the mortgage loan must generally be adjusted to five percentage points below the maximum for the specific mortgage product. However, if the lender has evidence that the property is not located in a declining market, the lender may offer the maximum financing for the loan product. Should the lender choose to offer the maximum financing, the lender must be able to provide documentation that supports its assessment that the property is not located in a declining market.
On a positive note, the application of the maximum financing in a declining market policy does not apply when a borrower has an existing Fannie Mae-owned or securitized first mortgage, and is requesting a new limited cash-out refinance mortgage.
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Lew Corcoran, Sr. Mortgage Consultant in Massachusetts |
Realtors, buyers and sellers here on Cape Cod have known that local housing markets have been declining for over two years Lewis. The fed stating the Southeastern Mass is a "declining housing market" is a little bit late dont you think and is stating the obvious?! so it sounds like Fanny Mae has finally woken up and changed/ updated its mortgage policies?
Cape Cod Realtor
I understand what you are saying Lewis. Not all agents are professional. Professionals would and should know about their market. Its their business. thanks
Cape Cape Realtor
does anyone have a source for actually housing price and sales data for the last couple years for barnstable county? we are very interested in purchasing a cape home, but need to better understand just how soft the market is, how long it might continue to decline, etc.
dana
Dana I could get you sales data for Barnstable County over the last 2 years showing you how the average prices have dropped and sales activity has declined. I just sold a home that was on the market for 2 years and had gone thru numerous price reductions trying to catch up to the declining market curve. Do you know in which town where you would like to purchase? You may also check Cape Cod MLS on my website http://www.sdwrealtyofcapecod.com for properties for free at your own convenience if you are not already working with a realtor.