Email I received a few days ago from a lender.
click on image to enlarge
To determine declining markets (declining house values), the agencies use three different indicators: S&P Case-Shiller Index, NAR statistics, and Office of Federal Housing Enterprise Oversight [OFHEO].
Effective for mortgage loans with an application date on or after January 15, 2008, Fannie Mae restricts the maximum loan-to-value ratio and combined loan-to-value ratio for properties located in a declining market to five percentage points less than the maximum permitted for the selected mortgage product. [emphasis mine]
via Fannie Mae
What that means to you? If you are qualified for LTV 95/5 with 5 percent downpayment, and you are buying in a declining market, you will now have to "up" your DP from 5 percent to 10 percent.
Furthermore, lower credit score buyers will have to pay points in addition to the higher DP - if buying in a declining market and financed with conventional loans (up to $417.9k).
Also new for 2008, Risk based pricing for conventional products. Borrowers with lower credit scores will experience an add-on to the points as follows:
Below 620 (..or missing score) 2.00% 620-639 1.75% 640-659 1.25% 660-679 0.75%
There you go. It's back to basic: Save more money for your home and maintain good credit score.