Lists distributed recently by several of the nation’s biggest players in the mortgage industry have labeled hundreds of metropolitan areas as “soft” or “declining markets,” making it more difficult for prospective homebuyers to obtain financing. Forest Park and several neighboring communities have been pegged as such, prompting critics to argue that imposing more stringent payment standards and higher down payments with such broad strokes is unfair and constitutes a new form of redlining.

“First time homebuyers, if they can’t scrape together that money, they’re going to have to settle for a lot less home,” said Sandra Wasiliauskis, an assistant vice president at Forest Park National Bank.

A year ago lending institutions were willing to allow applicants to finance their entire purchase if their credit score was 620 or higher, said Wasiliauskis. But since some of the biggest mortgage underwriters in the country, such as Fannie Mae and Freddie Mac, have instituted a policy not to purchase loans without an additional down payment of 5 percentage points, those policies become the de facto policies of local lenders.

Critics, however, charge that the soft market declaration has been applied broadly and arbitrarily. Entire zip codes are subject to the stiffer policies, thus handcuffing a local bank’s ability to account for market trends within their neighborhoods.

Rob Breymaier, executive director of the Oak Park Regional Housing Center, helped circulate a petition as part of a national effort with other housing groups fighting Fannie Mae’s new policy. Breymaier said that a lot of petitioners responded as if the rating system were a local issue, but he emphasized that it’s a national one.

“The industry leaders are Freddie Mac and Fannie Mae, and if they are going to produce standards that limit lending based on zip codes, banks have no choice but to put these things into place,” said Breymaier.

He described the policy as “too quick” of a response to the sub prime fallout, “too broad and not thought out well.”

The Chicago Tribune recently compared fall housing sales in 2007 with those of 2006. It showed that Forest Park, Oak Park and River Forest are veritable islands of increasing property values in western Cook County. The overall number of property sales in each of the three villages is down for that same period, however.

At Forest Park National Bank, Wasiliauskis is willing to assume the risk of 85 percent of a property’s value in almost any economic climate. All other loans are sold to larger companies such as Wells Fargo, Chase, Fannie Mae or Freddie Mac, according to Wasiliauskis. Knowing that the major underwriters are asking for an additional 5 percent in collateral, Wasiliauskis said local banks have almost no choice but to do the same or else they won’t be able to sell the loan.

She disagreed that the policies put in place by the industry giants equates to a discriminatory practice. Other factors, such as slumping sales, also put hurdles in front of potential homebuyers because without more recent sales to help formulate an appraisal, lenders and mortgage insurance companies may be skeptical of the selling price. In the long term, Wasiliauskis speculated that the tougher criteria will help restore solvency to the lending industry because buyers will be less likely to default on a loan if they have more skin in the game.

“It’s just human nature that if you didn’t put anything down what do you have to lose,” Wasiliauskis said.

Editor’s note: Wednesday Journal reporter Lars Sorenson contributed to this report.