Looser Lending

Posted October 21, 2014

Looser Lending On The Way?

It looks like mortgage giants Fannie Mae and Freddie Mac have reached a potential agreement with major banks that could ease lending guidelines.

The head of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, announced the potential agreement Monday at a conference of the Mortgage Bankers Association. The agreement could make more mortgage credit available without harming Fannie and Freddie’s finances.

An expansion of mortgage credit could help boost the housing market, which has recovered only gradually and mainly because some large real estate hedge funds purchased thousands of homes in the area. Housing is fairly stable right now any additional lending would be helpful especially for first-time homebuyers.

The Federal Housing Finance Agency is working with Fannie Mae and Freddie Mac to develop new guidelines that would allow some creditworthy borrowers to make lower down payments than currently required. Personally, I’m not sure I like the idea. Currently, FHA allows for a 3.5% down payment. I believe a buyer should at least be able to come up with that if they want to buy a home. In my opinion, every homeowner should have some skin in the game. While I believe the main reason for our real estate collapse was the no money down mortgage products available for investors. No money down was the main issue. I believe the minimum down payment breakdown should be as follows:

Primary Residence – 3.5% down payment
Second Home – 5% down payment
Investment Property – 10% down payment
Multi-Family Investment Property – 20% down payment

I know some people may disagree with me and think the down payments should be less. Remember my job is to help people buy and sell homes. If it was easier to get the financing I would make more money. It is not about the money. It is about the security and safety of our real estate market. I would prefer a more common-sense approach to mortgage lending and keeping the down payments where they are.

Fannie Mae and Freddie Mac own or guarantee about half of all U.S. mortgages, worth an estimated $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages. The two companies don’t directly make loans to borrowers. They buy mortgages from lenders, package them as securities, guarantee them against default and sell them to investors. This frees up the lender’s money so they are able to keep making new loans.

We all remember that the government rescued Fannie Mae and Freddie Mac during the financial crisis in 2008. Together they received taxpayer aid totaling approximately $187 billion. As a side note, both companies have repaid those loans!

It would be great to see a loosening of the current credit standards. Let’s just be careful how we go about it.

Please give me a call, email, or text me if you are looking at buying or selling a home. I’ve been involved in the real estate industry for over 30 years and have a wealth of real estate experience and information that you can benefit from.

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About the author

The above new construction article “Looser Lending” was written by Jeff Gould.

Jeff is a top-selling, nationally recognized REALTOR® and local FishHawk Ranch real estate expert. You will find him selling homes in Tampa Bay, Florida, and surrounding areas. Some of those areas include FishHawk, Lithia, Riverview, Valrico, Apollo Beach, Brandon, and Tampa.

If you are looking to sell or buy a Tampa Bay area home, Jeff is your local and trusted professional. He can be reached via phone/text at (813) 421-3007 or by contacting him below.