Bristol County has been removed from Citimortgage’s list of “significantly declining markets,” meaning Citi borrowers in that county will have an easier time getting a loan.
According to an e-mail sent to local brokers by Citimortgage May 12 and obtained by Banker & Tradesman, “Bristol County, MA was removed from Citimortgage’s list of Significantly Declining Markets and is therefore no longer subject to a 5 percent reduction of maximum LTVs. That means there are no counties in MA that fall into this category at this time.”
As recently as January, Citi also included at least one other Massachusetts county, Worcester, on its “significantly declining” list. Bristol is the last to be removed. Borrowers in counties so designated are required to put down a minimum of 5 percent of the property value, while those in counties considered “moderately declining” – which now includes Bris-tol County – can still get 100 percent loan-to-value mortgages.
Local brokers said many borrowers are still affected by other entities’ declining-market designations.
“There are four ways a property can be determined to be in a declining market,” one explained: an appraiser, the automated underwriting program of government loan guarantor Fannie Mae, a private mortgage insurance company or an individual investor such as Citi all can do so. In all such cases, borrowers have to come up with a larger down-payment on their home purchase.
The Citimortgage e-mail suggests if an appraiser or Fannie Mae’s underwriting program, Desktop Originator, determines a for-sale property is in a declining market, that the loan officer consider using Loan Prospector – Freddie Mac’s automated underwriting program – which “typically does not have the declining value message on the findings.”
One industry observer suggested that this approach echoed similar practices employed by some subprime lenders that ultimately landed many in financial difficulties or caused them to go out of business. Making a loan work in the moment, at the expense of assessing its true viability, could backfire for lenders, the source said.
But Jim Campen, executive director of Americans for Fairness in Lending, said Citimortgage never did much subprime lending and has not seen significant numbers of its loans foreclose.
“They didn’t go down that road before,” Campen said, “and there’s no reason why it would happen now.”
Since Bristol County still falls on Citi’s “moderately declining market” list, loans originated there continue to be subject to a host of restrictions.
Those restrictions include a stipulation that all appraisals require the broker to provide at least two additional listings or pending sales of similar properties in addition to the stan-dard, required minimum of at least three recent closed sales. Also, if a property is on the market for more than six months, a full re-appraisal, as opposed to re-certification of value, must be completed; and Citi no longer will grant appraisal waivers.
