1. Declining Markets Overview

2. How are declining markets defined?
Flagstar examines several data sources to determine which markets have declining home values
OFHEO Home Price Index (
Any MSA declining 1%+ over the two most recent quarters or declining overall year-over-year
S&P/Case-Shiller Housing Price Index
Any MSA with decline of 2%+ in a year or 1%+ in a quarter
Mortgage Insurance Declining Market Lists
Compare lists to OFHEO & Case Shiller indices data
Recent Flagstar Experience (including recent results of BPO’s, review appraisals and other collateral tools)

3. Flagstar Declining Market Policy
Loans located in a declining market will have the LTV/CLTV/HCLTV reduced by 5% if any of the following is true:
An appraiser marks home values as “declining” in the neighborhood section of the appraisal
The property is in one of the counties Flagstar defines as a declining market. The declining markets list is in the Home Lending Guidelines Doc# 6140
If statement 2 is the only true statement for FHA transactions, then Flagstar will not apply the added parameter restrictions if:
Internal AVM tools indicate the subject property zip zone or sales market is stable or appreciating over the past 12 months OR
An appraiser describes in the addendum that he/she has researched the market and finds home values have been stable or appreciating over the last 6-12 months. This appraisal MUST be obtained from one of Flagstar’s approved national appraisal companies.

4. What is Impacted
The Declining Market policy applies to loans requiring private mortgage insurance and FHA loans.
Mortgage insurance providers have also adopted their own Declining Market policies.
Due to rapid changes within the industry, please refer to each mortgage insurance company's website for complete details.
Document #6102 is a guide to assist you with keeping up with these MI Company changes. However, this document is to be used as a reference only.
Click below for a complete list of Flagstar Declining Markets
Declining Markets

5. Declining Market Clarifications
Seller Contributions: When a LTV is reduced because of declining market, all pricing, MI coverage, seller contribution limits, etc. will apply to the final LTV.
Example: PITI Abatement 95% LTV where property is determined to be in a declining market, the LTV is reduced to 90%, the MI coverage will be based on 90% and the seller contributions of 6% would then be allowed.
Flagstar Simultaneous Second Mortgages: You do not need to reduce the CLTV’s of simultaneous second mortgages by 5% from the limits stated in that product guide since the maximum LTV/CLTV of the first mortgage program has already been reduced by 5%.