Redlining
The practice of denying or increasing the costs of services (banking) to residents in certain areas.
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Countrywide has notified Brokers that it has implemented new "Soft Market Categories" They(the categorys) range from 1-5. Depending on which category your area falls into determines your financing
If you are in a category 4-5area you are considered to be the highest risk and your financing will be reduced 5%. In a 1-3? Well things are a bit better...yours will only be reduced if an appraisal review indicates any of the following situations:
- Declining Market
- Oversupply
- Marketing time over 6 months
Now you tell me...what are the chances of passing THAT acid test!
In the 1930's areas were classified as "A" -top rated, "B"-still desirable,"C"-declining,"D"-most risky, as a result of these classifications those on the "lower end of the scale" experienced even lower property values, increased property abandonment 
and a decrease of population density.
This was called Red-Lining and it was Illegal !
A B C.....or.....1 2 3 Do you see a difference? Am I naive, or will this only make things worse?
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Here in New Hampshire only three counties have been rated (a 2) they are Hillsborough, Rockingham and Strafford. The remainder of the State is considered "safe"
But in other areas of the country practically entire States have been rated "5". What are they to do???
Sure looks like Red Lining to me!
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Joan Mirantz - Joni is a Realtor® with Keeler Family Realtors, a locally owned, Customer Service oriented Firm.
Joan Publishes a monthly Newsletter "Food For Thought" under the pen name Realtor Sherpa.
(Joan also answers to Miz Maven and Miss Joni.)
Joan works in Buyer and Seller Representation with concentrations in the Merrimack Valley Area and towns surrounding Concord NH - the Capital City.
"I love what I do, and it shows in how I do it"
"A rose by any other name would smell as sweet" Shakespeare
"If it walks like a duck and quacks like a duck, I would call it a duck"
Its red lining
Joan, if you'd like me to rant about it, I'm in the mood for ranting. Great post- the battles we face if there's integrity in our bones!
If this is red-lining -- then it is illegal -- where are those who are supposed to enforce the laws??? I wonder who is in charge of enforcement -- maybe this should be called to their attention to investigate -- Perhaps notify the Consumer Federation of America -- they often carry the ball on things like this --
Laurie..They have it right there in black and white. This is a political year. Maybe I'll email my blog to Hillary!
And by all means ....rant! Maybe someone will notice!
Joan...do you have any contacts who may be interested in looking at this?
I may put this on my other blog too....a different set of eyes!
Not sure...Lenn has a blog tonight that talks about FHA Confirming Limits and the topic of declining markets came up briefly. I agree with you and suggested redlining was at play. Lenn said she thought so too until she discovered that the government is the one defining the markets.
I'm not sure which is worse.
How can that paint with such a wide brush? I believe that every situation is different and must be considered on its on merits. (Big sigh!) Government involvement is always scary to me.
Washington Post article about declining markets.
Fannie Mae drew the map. I'm all over the web this morning checking it out to learn more. It doesn't appear to be redlining as it is not preventing lending from occuring, it's just tightening the standards and requiring down payments in higher risk areas.
Amanda..I'll have to check out Lenn's blog
In response to your 2cd response...well, to me, at the very least, it looks like discrimination. If you are looking at higher down payments shouldn't that be based on a case by case basis not penalizing a whole area? And leaving it up to the arguably arbitrary discretion of an appraiser....it's like anything else , there are good ones and bad ones!
Won't this encourage steerage of clients to properties less likely to be questionable?
Lenn's blog barely touched on it in the comments section and I included the info in my comment here. I am sure with all of the fodder about it, she'll dedicate a blog post to the topic. She's cool like that. :)
I haven't been able to confirm just yet whether the down payment is based on appraised value or the purchase price. I've been digging up the answers to that question all morning. The Washington Post piece states LTV, but I am finding contradictory information every time I click.
Amanda...just finished reading the Post article...Too bad they concentrated just on Washinton area. They are not alone!
I'm not sure which value they are basing decisions on but the decision was an "automatic" additional 5% in an area "5" and 5% if an appraisors opinion criteria(see post) said so in an area 4
Joan, that was just one article of many pages on Google about declining markets.
I wonder what the practice of the other banks is, or if this is something that will go away when Countrywide is taken over by B of A?
Penny... check out Amandas links a little bit back. One was from the Washington Post and about USAA First Mortgage so it's more than one!
Joan, I got the CountryWide announcement because I am a mortgage broker on their list. I read it when I got it. I didn't consider it redlining, only prudence. If values are declining, they are trying to make sure that they are not going to over-encumber the property. My area is in category 4 so we are affected the most (4 and 5 are treated the same).
Bill Roberts
Joan, They aren't charging a higher rate like fire insurance companies do, they are simply allowing for declining prices in areas that have demonstrated softness in the market. Again, that is NOT REDLINING. And they aren't trying to steer anybody away from these areas. They are stll lending.
Bill Roberts
Bill Roberts
Bill...this is the place for healthy discussion..correct?
I didn't say the Lenders were steering, but if I have a customer who is interested in like,all is equal properties and one is in a rated area and the other...not. Why would they even consider one that would automatically cost them 5% more? At present, properties in areas determined by the BUYERS to be less desirable are still getting attention they are just getting lower offers and the Buyers are determining their own risk!(and fate)
I think we are looking at this from two different perspectives..but aren't you also a Realtor?
Joan, Yes, I've been a Realtor since 1975. I am not a fan of CountryWide as anybody who has followed my comments could attest. I think that they have to do this. In most cases it shouldn't affect you because your buyer will be looking at other houses within the same area. They are not differentiating by neighborhood, but rather by county.
Of all the things that you could go after CountryWide for, I don't think this is one of them.
Bill Roberts
BTW I could forward the announcement to you if you would like to have it.
Bill...Sorry to keep you waiting...I'm doing a localism blog for the accountables group and Jo really keeps our feet to the fire!
Thank you for the offer...but I've seen it. And think it is terribly expansive !
They are not the only Lenders doing this Bill if you read the Washinton Post link above...USAA is doing it in that area. They are closing ranks...or the barn door,however you want to look at it!
Joan, I think that you need to take a step back. Your area isn't affected to the same degree that mine is. I understand their motivation. It has been pretty well demonstrated this past year that when a homeowner gets upside down in their mortgage that they don't have a lot of incentive to keep the house, especially if they don't perceive that the price is going to come back anytime soon. So to loan money in this environment is risky at best and maybe even foolhardy.
All CountryWide wants to do is to make sure (as sure as they can) that the homeowner isn't going to bail on them.
High risk loans can be approached several ways: higher interest, PMI, bigger down payments. They simply chose bigger down payments.
Bill Roberts
Bill...I think we need to agree to disagree..we could go around about this for hours. It's all a matter of perspective!
You see it at Prudence...I see it as painting everyone with the same brush!
Have a great nite...I'm sure I'll run into you again at Bil Cherrys