Freddie Cautions Re Declining-Market Policy

Freddie Mac lenders may be "unnecessarily" limiting credit in some areas because of an "overly broad interpretation" of the agency's declining-market policy, a Freddie executive says in a letter to the National Association of Realtors. Freddie Mac has advised its lenders to use the Office of Federal Housing Enterprise Oversight's housing price index to determine whether a property is in a market where prices are declining and the maximum amount of financing should thus be reduced by 5%. Freddie executive vice president Patricia Cook said the HPI should not be used as "conclusive evidence" that every market in a metropolitan statistical area is declining. "If a lender and/or appraiser determine that the prices in a particular area are actually stable or increasing, and sufficient supporting evidence is provided, the 5% reduction would not apply," Ms. Cook says in a letter to NAR president-elect Charles McMillan. Ms. Cook also says Freddie is working on a "job aid" suggested by the NAR to help lenders "apply our declining markets policy appropriately." Freddie can be found online at http://www.freddiemac.com, and the NAR can be found at http://www.realtor.org.