New Government Policy: Redlining

Fannie Mae plans to change how it buys mortgages beginning June 1st. The new policy, known as the declining markets rule, requires higher down payments in communities where homes have lost value. This is redlining.

It matters because lenders will be less inclined to make loans in communities where Fannie won't buy their loans. This will mean a spike in loan declinations, a drop in sales, and an increase in the unsold inventory -- but only in the neighborhoods selected for disinvestment by America's erstwhile supporter of the American Dream. Does this sound wrong? It should to you!

This will hurt some North Carolina communities more than others. It really whacks the urban Midwest (Michigan, Ohio, and Indiana), as well as California and Florida.

Comments

Adam

Do you have any more background on this?

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“Don't tell me what you value, show me your budget, and I'll tell you what you value.”
― Joe Biden

redlining by Fannie

Yes. The outline of the proposal is available in two stages, both on pdf. Fannie has their latest iteration of it here.

My next post is going to talk about how it will be utilized by lenders. But, a good example of how it will work, zip code by zip code, is available here. Fannie Mae has an FAQ that explains it.

The implications for redlining are more dramatic as the area of exclusion becomes more focused. If declining markets are assessed on the MSA level, then it hurts everyone at the same time. Most of the pain is in the urban Midwest.

I would bet it matters at any geography along North Carolina's coast.

It is more sinister when policy shifts to the zip code, census tract, or zip plus four level. When it goes below zip code and down to census tract, which is a possibility, then it really has implications for inequality in service.

Adam Rust
CRA-NC
I have some more to say

Adam Rust
CRA-NC
Read some more, at my blog: Bank Talk.