Reverse Mortgage Guide

Last year both Fannie Mae and Freddie Mac, the big buyers of local mortgages, decided that falling real estate values required a change in the way they underwrite mortgages: In areas they identified as “declining” markets buyers would need an additional 5 percent down.

For reverse mortgage borrowers the new policy has been troubling. Why? Because “markets” were defined in very broad terms to cover entire metro areas — including, maybe, neighborhoods that are doing fairly well. Rather than pinpointing troubled markets, the concept inherently labels large areas as “declining” including, perhaps, individual homes and communities where the label is inappropriate if not wrong.

If you are a reverse mortgage borrower you likely want the largest possible loan against your property. You cannot get such financing if area values are depressed. Just in terms of PR and marketing, area values are surely not helped when described as “declining.”

Fannie Mae now says that as of June 1st it’s dropping the “declining” markets label. Instead, you need at least 3 percent down for any loan processed through Fannie Mae’s underwriting system and 5 percent if the loan is otherwise processed. In effect, forget labels and look at properties individually.

You can be sure that the “new” concept — a return to the old idea of looking at individual properties — will now be picked up by other lenders and mortgage buyers.

This is a change for the better, both for borrowers and Fannie Mae.

The complete release from Fannie Mae can be found by pressing here.

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This entry was posted on Monday, May 19th, 2008 at 12:37 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.