Fannie Mae reevaluating 3% down-payment loans
Aug. 19, 2013 – Fannie Mae reportedly is looking at possibly ending its purchase of mortgages requiring only a 3 percent down payment.
Freddie Mac will only purchase loans with at least a 5 percent down payment. Both Fannie and Freddie also require that loans made with less than a 20 percent down payment be protected by private mortgage insurance or other type of “credit enhancement,” a Wall Street Journal blogger explained in a post last week.
The report says Fannie isn’t considering this change due to any immediate problem with loan performance. It also says Fannie hasn’t purchased many loans with such a low down payment.
“Even though Fannie hasn’t bought many of these loans, low down-payment loans have remained widely available throughout the housing downturn largely due to federal agencies, including the Federal Housing Administration, which insures mortgages with down payments of 3.5%,” the report says.
The report quotes a Fannie spokesman pointing out any changes to its guidelines will be “communicated to the market at the appropriate time.”
Wall Street Journal blog, 8/16