Fannie May Alter Redlining Policy
Jul 31, 2020179.9K Shares2.6M Views
As we wroteyesterday, a policy by mortgage industry giant Fannie Mae to require higher downpayments and fees for borrowers in certain zip codes with declining house values raised charges of redlining. A powerful coalition of housing advocates and even lending industry groups such as the National Association of Realtors quickly challenged it.
It seems their efforts are paying off. Fannie Mae is expected to announce today that it will make changes to the policy, the Wall Street Journal reports.
Fannie apparently will no longer require higher downpayments for borrowers in certain zip codes. It also may allow for more flexibility, so if appraisers can prove that home values in certain neighborhoods are rising, then those communities won’t be designated as declining markets - even if the metropolitan areas that surround them are experiencing price declines, the Journal said.
The move comes as Fannie Mae and the lending industry as a whole have been charging higher fees for some borrowers based on where they live, prompting charges of a new kind of redlining that will price out of the market first-time homebuyers and those with modest incomes.
There’s no word in the Journal report about whether Fannie still will charger higher interest rates to those categories of borrowers. Some housing advocates had less of a problem with higher downpayments, saying that if they are combined with careful and accurate appraisals, they can be a legitimate way for lenders to make loans without taking on too much risk. But higher fees based simply on a borrower’s neighborhood, they said, only would make it harder for some borrowers to pay their mortgages and would actually add to a loan’s risk.
The fight over the policy shows how contentious lending may become as the housing market reacts to the credit crunch caused by the subprime market’s collapse.
From the Journal:
“„The concessions from Fannie and Freddie illustrate the conflicting pressures that they are facing. Many critics say they are taking far too many risks, increasing the danger that taxpayers may end up having to bail them out.
“„But politicians and the housing industry are pushing them to do more to prop up the housing market.
Regardless, any changes to the policy represent a victory of sorts for fair housing advocates, who don’t usually win battles this quickly.
Paolo Reyna
Reviewer
Paolo Reyna is a writer and storyteller with a wide range of interests. He graduated from New York University with a Bachelor of Arts in Journalism and Media Studies.
Paolo enjoys writing about celebrity culture, gaming, visual arts, and events. He has a keen eye for trends in popular culture and an enthusiasm for exploring new ideas. Paolo's writing aims to inform and entertain while providing fresh perspectives on the topics that interest him most.
In his free time, he loves to travel, watch films, read books, and socialize with friends.
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