Orlando Mortgage Blog

New Maximum Loan-To-Value (LTV) Reduction Rules 

6/11/08 Update to the data below: In Mid May Fannie Mae and Freddie Mac (conventional loans) updated their Agency Declining Value Market Policy to once again allow up to 95% financing in certain instances. Some lenders have begun to slowly align themselves again with the change as long as Private Mortgage  Insurance (PMI) is available to insure these loans. Check with us today. This is a big help compared to the below restrictions.

Effective the end of February, 2008, Fannie Mae and Freddie Mac have rolled out maximum allowable first mortgage LTV's that are effective across the board. They reduce maximum financing by a minimum of 5% or more in some circumstances to compensate for MSA area designations of soft, distressed or severly distressed market conditions in areas of declining real estate values. Florida is particularly effected by this now due to the high number of counties with falling values. In fact ruffly half of Florida's 67 counties are currently effected by the designations.

How does this effect you? A 5% reduction from the maximum financing allowed by program now applies if:

• Primary residence
• Purchase > 75% LTV/CLTV
• Cash-Out Refinance > 75% LTV/CLTV
• Second Home > 75% LTV/CLTV
• Investment Property > 75% LTV/CLTV

So, a normal 95% maximum LTV on a 30 year fixed conforming loan would be reduced to 90% and therefore require 10% instead of 5% down. *

There are also additional LTV/CLTV restrictions for Non-Conforming Loans and may vary based on market designation. A 5% reduction from maximum financing is required on ALL transactions (regardless of whether or not the property county is identified as At Risk, occupancy, etc.) when the appraiser identifies any of the following:

• Declining property values
• An Oversupply
• >6 months marketing time

If the LTV/CLTV has already been reduced to 5% below maximum financing as a result of the At Risk Market policy, no additional reduction is required.

* We still have, as of the date of this writing, a PMI source for 95% owner occupied, purchase and limited cash out financing on conforming conventional loans without having to apply the 5% reduction per the new guidelines. Call today for current details.  

Bill Wilbanks/  www.OrlandoMortgageMasters.com