Fannie Mae loosens loan standards
for hardest-hit housing markets

WASHINGTON – The nation’s largest mortgage-financing provider, Fannie Mae (NYSE: FNM), today announced it will stop requiring larger down payments in regions where home prices are falling, Bloomberg News said. Effective June 1, homeowners approved by the company’s automated computer program will be able to borrow up to 97 percent of the value of the property, while loan-to-value ratios of up to 95 percent will be allowed on other mortgages, Fannie Mae said.

The change will end a policy the government-chartered company adopted in December, amid rising foreclosure rates, to guard against losses from the nationwide housing slump. The National Association of Home Builders and National Association of Realtors both had charged Fannie Mae and McLean, Va.-based Freddie Mac (NYSE: FRE) with deepening the housing crisis; the lenders’ tighter standards also spurred letters of protest last month from more than 80 housing advocates.

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Fannie Mae said it can handle the changes because it is changing the computer models it uses to decide whether to issue a loan. The company this month posted a first-quarter loss of $2.19 billion, saying it will cut its dividend and seek to raise $6 billion in capital as it deals with the worst housing market in decades.

“We’ve been working on ways to meet the market’s need to recover,” Marianne Sullivan, Fannie Mae’s senior vice president for single-family credit policy and risk management, told Bloomberg News in a telephone interview today. On May 6, Fannie Mae agreed to loosen other lending standards, including those for “jumbo” mortgages.

Fannie Mae (NYSE: FNM), founded in 1938, is a government-chartered buyer of mortgage assets and issuer and guarantor of mortgage-related securities through its three segments: Single-Family Credit Guaranty, Housing and Community Development and Capital Markets. Its customers include mortgage and investment banks, savings and loans, savings banks, commercial banks, credit unions, insurance companies and state and local housing finance agencies. To learn more, visit www.fanniemae.com.