Realtors and mortgage originators have been plagued with the declining market policies put into place by Fannie Mae over the last several months. It has been frustrating for clients who want to purchase a home in these areas because they have had to put an extra 5% down. They can find a home for a great price but they are required to have a minimum on 10% down due to the area where they are purchasing. This was discouraging potential buyers from buying homes in the areas hardest hit by foreclosures.
It was also very discouraging for those home owners who needed to refinance their home due to ARM’s expiring. With the value of homes declining in the Las Vegas area, many borrowers were finding that in order to refinance their mortgage and stop the interest rate from adjusting that they needed to borrower 95% of the homes value. With the new guidelines in place for declining markets, it was making it impossible for some people to refinance and stop the interest rate and their payments from increasing. As a result, some were losing their homes which creates more foreclosures on the market.
Fannie Mae has changed their requirements after they have been hearing concerns from professionals in all areas of the real estate industry. Effective June 1st, clients can finance up to 95% for purchase transactions and refinance transactions. This should help spark the purchase market in areas where the foreclosure ratings are high and reinforce the goal of successful home owning again. It will also help those who are in need of refinancing to get out from under their ARM loan before they can’t afford their payment anymore.
Overall, this is a positive move in the lending industry that should help generate new home sales and stop others from losing their homes because of increasing rates and payments. I am looking forward to seeing how this change will effect the Las Vegas real estate market.