Well, this is where things start going bad.
Several major lenders, including Countrywide Bank and GMAC-ResCap, have categorized hundreds of counties and Zip codes as “soft markets.” Borrowers in these areas are often charged larger down payments and other penalties, critics say.
Lenders say the action results from restrictions imposed by Fannie Mae late last year. Fannie Mae’s own electronic underwriting system had begun flagging selected markets as high-risk, and Fannie Mae also strongly encouraged lenders to use “supplemental” data sources to come up with their own risk-ratings by market area.
Brian Robinett, chief credit and operations officer for wholesale lending at Countrywide, says it is unfair to call the company’s rating system “redlining” because a variety of property types, income levels, and ethnic groups are equally affected by every risk ranking.
David Berenbaum, executive vice president of the National Community Reinvestment Coalition, a consumer advocacy group is particularly alarmed at the trend. “Sound underwriting has nothing to do with geography,” he says. “It is based on the income and qualifications of the applicant, and the valuation of the property by a professional appraiser.”
Yeah, I know. You thought that word was gone the way of the Selectric.
Source: New Lending Policies Called Redlining – Kenneth R Harney, The Washington Post, by way of Realtor.org
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