High Risk Zip Codes and Counties Subject to Additional Downpayment Requirements By Lenders
It just got even tougher to sell properties in locations where foreclosure rates are excessively high. Back in December, Fannie Mae sent a letter to lenders indicating that beginning in January of 2008, loans made for properties in certain zip codes and counties labeled high risk would be subject to additional down-payment requirements. These restrictions have forced many of the nation’s top lenders to impose their own down-payment penalties on to loan applicants. For example, Countrywide Bank recently announced its policy change to affiliate mortgage brokers. Buyers seeking properties in locations labeled as “risky” or “declining” must now put down 5 percentage points more than they would have had to in the past under the same loan program. If the minimum down-payment was previously 10%, it would now be 15%. The practice is controversial at best. The additional requirements will reduce the number of potential buyers into the area, keeping prices down. This will make it even harder for these markets to recover. It also runs the risk of unfairly penalizing stable neighborhoods in those high risk zip codes (or counties). Read more about it in the Washington Post.
