Fannie Mae Removal of 5% Market Decline!!!!!!!

Following a similar decision by Fannie Mae, Freddie Mac has eliminated its controversial policy of requiring borrowers to put up larger downpayments in markets where home prices are declining. "Beginning June 1, 2008, we will allow maximum financing up to 95% LTV for most Freddie Mac mortgages in all markets," Freddie says in a May 16 e-mail message to its approved lenders. Under its declining-markets policy, the maximum amount of financing was reduced by 5% in markets where lenders determined that house prices are falling. On May 2, Freddie issued a bulletin to its lenders revising the policy so that the loan-to-value ratio of 95% became the floor for most loan products. "The practical effect [of the May 16 change] is that lenders no longer have to make that determination about a declining market," a Freddie spokesman said. As previously reported, Fannie is scrapping its declining-markets policy starting Jun e 1. Source: National Mortgage News

Industry Update

With prices falling around the nation, home price affordability has improved dramatically in many U.S. cities. As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB). That's up from 44% during the first three months of 2007 with home prices the most affordable they've been since the three month period that ended June 30, 2004. "Three factors combined to substantially increase housing affordability," said NAHB president, Sandy Dunn, in a press release accompanying the report. "Mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide (from 2007 to 2008) and lower house prices." Home prices dropped about 8% compared with a year ago, according to NAHB, but that doesn't mean that buyers are flocking back to the market. "This measure can only take you so far in implications for the market," said Dave Seiders, NAHB's chief economist. "There're several factors that the index does not capture." Source: CNN/Money