Effective June 1, 2008 Fannie Mae has revised down payment requirements for conventional, conforming loans that they will purchase or guarantee. The ratio of home loan to value can be a maximum of 97% for loans written through the automated underwriting system known as Desktop Underwriter. The lower ratio of 95% of loan to value is available for conventional conforming loans written outside of the automated Desktop Underwriting system. This new national policy makes low down payment loans available nationally in areas where home   prices were declining. This means that buyers of owner occupied single-family homes will have a consistent national approach when applying for a conventional conforming mortgage.

Housing sales peaked in 2005 and have been experiencing a pricing decline since. The good news is since the correction, prices are beginning to stabilize and Fannie Mae is seeing lower risk of further significant declines. This new down payment policy that supersedes the former “declining market” provisions means home buyers may not need higher down payments. The new policy also helps assure stability, liquidity and affordability for the housing market which should help those seeking mortgage loans.

Fannie Mae also has streamlined refinancing for borrowers whose mortgage balance exceeds the value of their homes; improved pricing for jumbo-conforming mortgages and undertaken a neighborhood stabilization initiative for targeted areas with high home foreclosures. These policies should help further strengthen the housing market’s long-term prospects.