Fannie Mae's Declining Value Area Designation

We're starting to see the "Declining Value Area" condition popping up on some of our automated underwriting decisions on Jackson County, Oregon properties. In many cases, this will not affect the borrower's loan amount. For first time home buyers putting the minimum amount down for their down payment, it is creating some challenges, though. Down payment assistance programs are becoming even more valuable to help buyers meet a higher down payment requirement.

A Southern Oregon buyer that was preapproved long before this guideline change went in to affect is now having to consider coming up with an extra 5% to put down if they miss their closing date, which due to circumstances beyond their control has been delayed.

If when we run a file through an automated underwriting system the property is deemed to be in a declining value area, the loan-to-value has to be reduced by 5% - i.e. if an investor may borrow a maximum of 75% of the appraised value on a refinance under the program limits, they can now borrow 70%.

Thank goodness some of the lenders are backing off enforcing their own lists of declining value areas which incorporated areas that Fannie Mae wasn't including. Real estate markets are local markets, and creating criteria based on zip codes just doesn't work in an area like the Rogue Valley.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com