Freddie Retreats on Declining-Markets Policy

Following a similar decision by Fannie Mae, Freddie Mac has eliminated its controversial policy of requiring borrowers to put up larger downpayments in markets where home prices are declining. "Beginning June 1, 2008, we will allow maximum financing up to 95% LTV for most Freddie Mac mortgages in all markets," Freddie says in a May 16 e-mail message to its approved lenders. Under its declining-markets policy, the maximum amount of financing was reduced by 5% in markets where lenders determined that house prices are falling. On May 2, Freddie issued a bulletin to its lenders revising the policy so that the loan-to-value ratio of 95% became the floor for most loan products. "The practical effect [of the May 16 change] is that lenders no longer have to make that determination about a declining market," a Freddie spokesman said. As previously reported, Fannie is scrapping its declining-markets policy starting June 1. Freddie Mac can be found online at http://www.freddiemac.com.