New Loan System to Begin Easing Access to Mortgages?
The Federal Housing Finance Authority (FHFA) just announced a new loan system for Fannie Mar and Freddie Mac mortgages. Is it the fix we need to start making home loans easier to get again?
If mortgages were easier to get more people would certainly be buying a home and it would make selling homes a lot easier too, putting the current real estate recovery on the fast track.
Unfortunately one of the biggest reasons that mortgage lenders aren’t loaning isn’t that they are just worried about making loans that won’t go bad on their own books or because they are being extra tough just to be on the safe side, it is because they are afraid that they could be forced to buy back masses of sour loans in the future. In fact banks were already forced to repurchase $19 million of loans from Fannie and Freddie this year.
The new system seeks to restore confidence for mortgage originators and limit their liability period to just 12 to 36 months depending on the type of loan. This will be done in conjunction of faster reviews of loans sold to Fannie Mae and Freddie Mac beginning at the first of the New Year.
So will it work?
We’ll have to wait and see exactly how much it helps and how soon but it’s great the government is realizing that this is a major roadblock and anything done to develop more confidence in the U.S. mortgage market will be better for all types of mortgage lending.
However, in the meantime there are many other home financing options out there for buying a home and flipping houses from transactional lending to local government assistance programs to private mortgage lenders.