Fannie Mae drops controversial “declining market” policy

The policy was a bad one: Fannie Mae – the government-created agency that makes sure that mortgage bankers and other lenders have enough funds to lend money to home buyers at fair rates — was requiring borrowers in markets determined to be “declining” to put an extra 5 percent down when purchasing a home.

Real estate officials — and other advocates — had complained that the policy discouraged consumers from buying homes in the markets hit hardest by foreclosures.

Now that Fannie Mae has discontinued its “declining markets” policy, borrowers in markets where housing prices have been falling can still get mortgage loans with a 95 percent loan-to-value ratio.

You can read about Fannie Mae’s new policy here.

This is a move to applaud. We should be making it easier for buyers to purchase homes in struggling markets. How else can these markets move from struggling to successful?