Fannie Mae, the largest buyer of home loans in the United States, will be dropping its policy requiring higher down payments in areas such as Reno labeled as "declining markets."
The move is aimed at helping spur homeownership in places hit hardest by the housing crunch, the lender said.
The move is expected to make it easier for people to buy homes in Reno, Sparks and portions of Washoe County. The previous policy required many buyers to pay an additional 5 percent down payment to qualify for a loan.
Starting June 1, Fannie Mae will accept conventional conforming mortgages processed through its automated underwriting system with loan-to-value ratios of up to 97 percent, a down payment requirement of 3 percent. Loans underwritten outside its automated system will have a 5 percent down payment requirement, the government-backed lender said.
"Anything we can do to help the economy turn around and get people in homes is a positive influence for our community," said Mike Dillon, director of government affairs for the Builders Association of Northern Nevada. "With lending institutions really having some challenges, the requirements for people to get into homes are definitely a lot more strict. Anything that can act as a stimulus and help with (the home ownership) process is something we'll be in favor of."
The new Fannie Mae policy replaces one adopted last December that restricted loan-to-value ratios in declining markets. The restriction essentially led to higher down payment requirements for conventional loans.
The extra down payment requirement, combined with tighter lending guidelines and a higher rate of foreclosures, has made it especially difficult for areas severely affected by the subprime crisis to jump start a recovery, critics said.
"For markets like ours, the declining market policy is certainly a problem," said Wayne Capurro, president of the Reno/Sparks Association of Realtors. "When you've got lenders requiring an extra 5 percent down payment, that just takes buyers out of the market, which is suffering from a lack of buyers in the first place. This new policy should have a favorable impact on the housing market and may even affect us in a more positive way than other areas that haven't been hit as hard."
Jeff Hayward, senior vice president of Fannie Mae, said the policy change should bring more affordability and liquidity to the most distressed communities.
The question now is how long it will take before the changes truly take effect, said B.J. Perez, broker-owner of Monarch Mortgage in Sparks.
"(The policy change) is good news but a lot of times, it takes time to implement these things," Perez said. "Hopefully, we'll see some improvement in a couple of weeks."
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