Pressure Builds for Change We Can Believe In
What happens in Washington D.C. frequently confounds more than clarifies. New rules and regulations tend to raise the level of frustration more than ally it.
Let's be honest, many people have been frustrated by mortgage underwriting standards. They're viewed as overly stringent. It's difficult to argue with the perception, but the fact is that many private lenders have at least marginally eased underwriting standards this year. Then again, standards can be eased only so far, because they must still adhere to guidelines mandated by Fannie Mae and Freddie Mac. These to government-sponsored organizations guarantee two-thirds of mortgages originated.
The good news is that Fannie and Freddie are loosening rules that have forced banks to buy back billions of dollars worth of home loans. These rules have kept lenders cautious about making home loans to borrowers with imperfect credit, because lenders could wind up absorbing losses if the loans default. At the same time, these regulations have raised the cost of originating mortgages.
These rules have been particularly tough on the entry-level market – homes priced under $300,000. In other words, the important first-time buyer has been under-served. We need the first-time buyer to grow the market.
The good news is that new Fannie and Freddie guidelines will enable us to better serve and grant more credit to all potential borrowers going forward. This can be only a positive for housing.
Courtesy of Jessica Regan.
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