UPDATE 4-Fannie Mae relaxes loan down-payment requirements

(Adds OFHEO response, Freddie Mac policy)

By Lynn Adler

NEW YORK, May 16 (Reuters) - Fannie Mae, the largest U.S. home funding source, is setting a single national standard for down payments on mortgages it buys, including areas where home prices are falling, in an effort to stimulate the housing market.

On loans it purchases, the company will accept down payments as low as 3.0 percent for single-family, primary residences in all U.S. markets starting June 1. That replaces a policy set in December that mandated higher down payments in markets where home prices are dropping, Fannie Mae said on Friday.

The rule change comes as many in the housing industry call for Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research), the second-largest federally chartered home funding company, to make more affordable housing available. The two government-sponsored, shareholder-owned companies buy mortgages, freeing up funds for more lending.

Fannie Mae's new down payment policy is a "sound" move that could help unfreeze the U.S. housing market and uncover pent-up demand for mortgages, James Lockhart, director of the Office of Federal Housing Enterprise Oversight, said on Friday.

"It's still sound underwriting and makes sense in this type of market," he told reporters after a speech at a Federal Reserve Bank of Chicago conference. OFHEO is the regulator for Fannie Mae and Freddie Mac.

Both companies have tightened standards on loans they purchase, such as mandating higher credit scores, and have raised fees to better reflect risk as defaults and foreclosures escalate.

Fannie Mae "will be equalizing the down payment requirements for borrowers in all parts of the country, regardless of local market conditions," Marianne Sullivan, senior vice president of single-family credit policy and risk management, said in a news release.