Homeownership at Best!

Homeownership at Best!

Federal Housing Finance Agency has been working towards a plan to open what many we see as underwriting standards that are too restrictive.

Mortgage giants Fannie Mae and Freddie Mac, their regulator and lenders are close to an agreement that could greatly expand mortgage credit while helping lenders protect themselves from charges of making bad loans, according to people familiar with the matter.

Homeownership getting better!

Homeownership Gets Better!

If the agreement is completed, lenders may be more willing to lend to borrowers with lower credit scores and smaller down payments.

Now that lenders are starting to remove some of the credit overlays, it is time to improve the growth of homeownership in the country

We expect FHFA to report the steps to further move and clarify lender liability and support the return of the 97% LTV product at the GSEs, Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac have recouped tens of billions of dollars in penalties from lenders in recent years over claims that the lenders made underwriting mistakes on loans they sold to the mortgage giants.

However, Lenders have blamed those penalties for tight credit conditions and for prompting them to make loans only to borrowers with near-pristine credit.

We hope these initiatives will have a meaningful impact on the mortgage market, and we can see positive changes in the direction of the mortgages industry after years of tightening credit issues.

Next Tuesday will see the existing home sales report for September, on Thursday the FHFA purchase-only house price index for August, and Friday the new home sales report.

 

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Fannie Mae reduces waiting period for distressed borrowers

Fannie Mae reduces waiting period for distressed borrowers

A recent report revising the waiting periods for distressed borrowers with a derogatory credit event such as a foreclosure, bankruptcy, short sale, or deed-in-lieu of foreclosure on their credit history to obtain a new loan has been released by Fannie Mae. This revised statement reduces the waiting period up to two years for borrowers with a short sale or deed-in-lieu of foreclosure on their record if there are extenuating circumstances that borrowers can prove. FannieMae

According to Fannie Mae, extenuating circumstances are defined as “nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.”

If a borrower has a foreclosure on his or her credit record, the new minimum waiting period is seven years. Under extenuating circumstances, that period is shortened to three years with some additional requirements for up to seven years. For those with a bankruptcy the waiting period is four years but two years with extenuating circumstances from the discharge date.

Fannie Mae said in the report that it is “focused on helping lenders to provide access to mortgages for creditworthy borrowers while supporting sustainable homeownership” and that the new policy “provides opportunities for borrowers to obtain a loan to Fannie Mae’s maximum LTV (loan-to-value) sooner after the Pre-foreclosure, Short Sale or DIL.”

Is the government helping the middle class enough to buy a home?

Is the government helping the middle class enough to buy a home?

Just as the housing recovery should be taking off, lenders are turning away potential home buyers by demanding unusually high credit scores and other tough standards on government-backed loans – exceeding the government’s own criteria in a bid to insulate themselves from financial penalties and lawsuits. The reluctance to lend has alarmed policymakers and heightened tensions between them and the industry as each side struggles to rectify the problem without exposing themselves to unreasonable financial risks. house7

As many as 1.2 million additional loans would have been made annually since 2012 if normal, pre-housing bubble lending standards had been in place, according to a recent analysis by the nonpartisan Urban Institute.

But lenders say the mixed messages they’re getting from Washington give them no incentive to widen access to credit. The government, determined to prevent a repeat of the irresponsible lending practices that sparked the housing bust, has forced lenders to buy back billions of dollars in loans and continues to trumpet massive legal settlements with the industry.

Fannie, Freddie and the FHA collectively own or back nearly half of all U.S. mortgages, according to Inside Mortgage Finance. None of them makes loans, though they are critical to making mortgages widely available.

Fannie and Freddie buy loans from lenders, package them into securities and sell them to investors. For a fee, they guarantee the mortgages and then pay investors if the loans default. The FHA insures the lenders it works with against losses if loans go bad.

Federal Reserve Chair Janet L. Yellen weighed in this summer, lamenting that “any borrower without a pretty pristine credit rating finds it awfully hard to get a mortgage,” which in turn has slowed the housing market’s recovery.

 

What matters the most…Home Prices or Low Rates?

What matters the most…Home Prices or Low Rates?

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Whether sales price is more important than the interest rate depends on your perspective. It’s pretty much impossible to time the real estate market, but you can try to take advantage of the way the market moves.

A dramatic rise in home prices can slow home sales even when mortgage rates are low if mortgage availability is tighter.  Banks prefer higher prices to recoup their capital from their bad bubble-era loans, so they are offering 4% interest rates to prevent prices from going any lower.

However, most buyers prefer lower prices, but since the banks make the rules which determine market prices, low interest rates and high prices are what we get.

Buyers who purchase during a period of high mortgage rates may get the boost in appreciation from declining rates.  Low mortgage rates build equity faster through amortization but slower by appreciation. High mortgage rates build equity faster by appreciation but slower through amortization.

You can’t always predict how the market will move. But you can watch it move and get ready, set…GO!!