Washington Post: ZIP code redlining

Kenneth J. Harney reports in the Washington Post that many of the country's largest mortgage lenders are imposing loan restrictions on entire counties or ZIP codes that they rank as risky or "declining".

Harney cites practices like Countrywide's five-point rating scale and GMAC ResCap's internal ZIP code search engine as the result of new Fannie Mae restrictions requiring area-by-area risk ratings and down payment standards.

Critics believe that such ratings for such broadly-defined areas are unfair and ignore the nuances of the housing market from street to street and from block to block, and they completely ignore the income and qualifications of the applicant.

This characterization of a geographic area as "declining" may be turn out to be a self-fulfilling prophecy - higher down payments will mean that fewer people can afford them. They then stay on the market longer and drop in value.