Thursday, January 24, 2008

Clark County affected by New Fannie Mae Guideline

Just when the Las Vegas homes market was starting to come out of the doldrums, Fannie Mae has put another roadblock in front of many would be Las Vegas homeowners. We had been experiencing a lot more activity over the past month and at the auctions almost every property had actually been put under contract.

Last week Fannie Mae announced a new guideline relating to insuring loans in declining or soft markets. In Clark County, the new guideline requires a 5% reduction in the form of an additional down payment by the buyer on the maximum loan allowed on a residence. This new guideline officially started last week on January 15, 2008 and applies to all loans already in process.

Many banks are enforcing this guideline on all loans, not just conforming Fannie Mae loans of less than $417,000, but also on jumbo loans over $417,000 as well. This guideline does not apply on government loans like FHA and VA.

There is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is "stable," "declining" or "increasing." If the appraiser checks the box on the appraisal report that says the market is "declining," the buyer’s down payment on the selected loan program has to be increased by 5%, even if the appraisal comes in at or over the negotiated purchase price.

For example, the purchase price is $200,000 and you need 100% financing. The appraisal actually comes in at $220,000. Even though the appraisal came in higher, if the declining market box is checked, you still have to put 5% down on the $200,000 purchase price. If your loan program originally called for a 5% down payment, now you will need 10% instead.

Although many lenders are looking at reconciling these types of challenges, today the appraisal of the home means nothing compared to whether or not the community has been stigmatized as “declining.”

Fannie Mae and some national lenders have declared many areas around the country as declining markets. It doesn’t matter what the value of the appraisal is. It’s whether or not the county has been declared as declining that determines how much you can actually borrow. The maximum loan allowed is automatically reduced by 5%-10% in these areas, depending on the loan product.

This means that many more buyers will be revisiting the idea of getting FHA and VA loans in the near future. (Many mortgage brokers don't even have FHA or VA approvals yet as these were not popular programs during the past five years.) FHA currently requires 3% down, but the seller is also allowed to pay that down payment on behalf of a buyer using their Nehemiah program. And VA still allows eligible veterans to obtain a loan on 100% finanacing. For more information on Las Vegas mortgages please contact us at 702-985-7654 and we will be happy to help you find the lender that has the best program and rate for your particular circumstances.