The Wall Street Journal says that Fannie Mae is considering reducing the number of low-down-payment loans it purchases.
You might not have known this: Even with higher mortgage standards (by law or by market forces), Fannie Mae would still purchase loans that had only three percent down payments. Of course, there weren’t many of them around — the catch was that Fannie required mortgage insurance on those loans, which wasn’t easy to come by.
But now, the Journal reports, Fannie is seeing more of those three-percent-down loans, and is considering limiting its purchase of them. (Freddie Mac requires a five percent down payment to buy or insure a loan.)
What happened? On the one hand, FHA raised its insurance premiums for low-down-payment mortgages. On the other hand, private mortgage insurers have removed some restrictions and begun offering better rates — and that’s made it possible for private lenders to begin offering low-down-payment loans again.