Fannie Mae and Freddie Mac Decide to Stop Feeding the Frenzy

May 30, 2008

Last week, news was that even San Francisco had been tagged a “declining market” by some institutions and that downpayment requirements were going to go up by at least 5% for loans financed by Wells Fargo and other leading lenders.  This was based on the requirements of the quasi-federal Fannie Mae and Freddie Mac for higher downpayments in troubled real estate markets and was not good news for buyers who have seen their minimum downpayment requirement go from 5% to 10% to even more already in the last 6 months. 

One of the objections to this is that high performing sub-markets (such as the northern 2/3 of San Francisco) were being unfairly penalized and actually damaged by this kind of requirement.

This week, Fannie Mae and Freddie Mac reversed their policy, and will have the same downpayment requirements whether a market is flagged as “declining” or not.  Read the whole article here.