Are you ready to be Redlined?

It is not absolutely clear if your home is in a neighborhood scheduled for redlining by Fannie Mae.

Still, GMAC has posted a page for their mortgage underwriters that indicates how they are estimating the same question. Just follow the link and enter your zip code. It is important to note that this is not Fannie’s list. It is just a shadow indicator, and it serves to make an educated estimate of what might be on a list that has not yet been published.

In the GMAC system, if your zip code is “low-risk”, then you are fine. If you are rated a “c” or a “d”, then you are in a declining neighborhood.

Fannie is going to identify a declining market as one that has lost more than 1 percent in price in the last two quarters, or is down in year over year.

GMAC is using zip codes. Fannie has not indicated what geography they will use. It could be as large as the Metropolitan Statistical Area (MSA) or as small as zip-plus four. The latter represents between five and ten households.

Anyone seeking to buy your home would have to pay a higher down payment to buy your home, provided that they utilize a lender that intends to securitize their mortgage.

The additional down payment is 5 percent of the loan amount, with a few caveats. It does not go into affect if a borrower intends to borrow less than 75 percent of the value of the home. Still, its a policy with a sizable impact. The average American home costs about $200,000. In that situation, this policy would mean that down payments have to go up $10,000 in “declining” zip codes. That will ultimately hasten the drop in home prices in those neighborhoods. It will also add to the inventory of unsold homes in such neighborhoods.

What does this mean for manufactured housing? In general, not a lot. Fannie Mae does not buy many manufactured housing loans in the first place. This mostly concerns single family housing. In some communities, when Fannie cuts back its willingness to buy loans, then there will be a cascading impact on home sales. This is not unlike what happened to manufactured housing, though, in the 2001, when it went through a series of challenges to its financial system.

~ by samsondoggie on April 25, 2008.