If you are in the market for a new mortgage loan, whether for buying a home or refinancing a home, then you might have run across a term that is causing great confusion in the real estate market today. The term that I am referring to is “Declining Markets.”

What Is A Declining Market And How Does It Affect Me?

Whenever I want to know something that relates to the mortgage industry, I ask a great mortgage loan officer that I know, Joe Kupiszewski, of Century 21 Mortgage. So I went to Joe this morning and asked if he could brief me on “declining markets” and he gave me a bevy of information. What I hoped to provide was a declining market definition, but what I learned is that it really is not that important anymore. And as Joe so clearly put it, it is confusing

Joe provided me with the latest word from Fannie Mae, but added “The problem is that while this is the latest word, it is not the final word. The big rub comes in from the mortgage insurance companies, which makes sense. After all, they are the ones insuring the first loss position. The last paragraph of page two of the attachment sums up Fannie Mae’s positions very clearly.Their terms: Maximum 97% Loan to Value (LTV) on conventional/conforming loans regardless of the market with their proprietary Desktop Underwriter (DU)/Automated Approval, and 95% LTV maximum financing if the loan is underwritten outside of DU (manually).”

O.K. You got that?

I believe what Fannie Mae is now saying is declining markets are no longer an issue with them, though they might be with the mortgage insurance company. So I asked Joe for a little clearer explanation on what Century 21 Mortgage could do and he responded: “If you are able to put down 10% or more and have decent credit, conforming is the way to go. If you are not, I would give a serious look at FHA. VA is still going at 100%, but the borrower must qualify through prior or present service in the military. You may be able to find 95% financing on conventional, but it could very easily disappear before you get to close.

FHA/HUD has also raised their guidelines. I still see lenders claiming 560 FHA in my spam folder every day, but 2 months ago, they were at 520.  We are at 580 MINIMUM and that will have to be on an exception basis. Further, FHA recently announced tiered pricing so it is no longer a one size fits all product - both good and bad.  The differences are not huge, but they are creeping in.”

My Conclusion On Declining Markets And The Mortgage Market

• Most real estate markets in the U.S. are declining, therefore the term “Declining Market” has little or no real meaning anymore.
• Fannie Mae is working hard to work out of this mortgage market mess.
• Most mortgage lenders are fair and honest, but there are those that send “spam” and make promises on terms that they cannot ever deliver.
• You need to work with a mortgage lender that you can trust. Period.

For those of you who have read this and have a thirst for more information, you can download the lastest word on declining markets from Fannie Mae. Good luck and have a strong cup of coffee handy!

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Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.