Significant Changes in Mortgage Rules Could Be Coming

The recovery of the housing market is a delicate process.  As a REALTOR, I want to see my buyers be able to get the financing they need to buy the right home.  I want to see my sellers be able to sell a property that has served them well, but no longer meets their needs.  Mortgage financing is critical in this process.  However, the balance must exist between ability to access loans and responsible lending on the part of the banks. 

There has been a change in leadership at the Federal Housing Finance Agency (FHFA) and with it, we may see a shift in course from a pull back in the lending market by Fannie Mae and Freddie Mac to a new focus on making more credit available to home owners.

According to the Wall Street Journal, the new director, Mel Watt, said at the Brookings Institution in Washington, "I don't think it's FHFA's role to contract the footprint of Fannie and Freddie."  He added that it "would be irresponsible" to wind down the companies with clear proof that private investors are not willing to step back into the housing-finance market.  Mr. Watt's position is in line with the Obama White House, as Jim Parrott, a former White House housing adviser, said Freddie and Fannie should be "institutions that should be better prepared to form the core of our system for years to come." 

There is a clear strain here when the remarks of the previous FHFA director, Edward DeMarco are considered.  He said at a banking conference in Charlotte, N.C., "Do not confuse weakening underwriting standards and underpricing risk with helping people or promoting market efficiency."  Mr. DeMarco spent the last 5 years restricting the flow of easy money that fueled the housing bubble and subsequent bust in the 2008 crisis.   

Regulators announced early in May a series of steps that they believe will help ease lending standards, which were abruptly raised by lenders during the financial panic.  This should make it easier for first-time and other entry-level buyers to access financing.  Legislators have been discussing adding a 20% down minimum, but the Department of Housing and Urban Development (HUD) warned regulators away from this requirement, saying that a high down payment wasn't the only way to prevent defaults, but would likely destroy any chance for a full housing-market recovery.

I will keep abreast of this situation.  I work with several excellent lenders, so if you are beginning to look for financing and would like to speak with knowledgeable professionals, please let me know.  I would be happy to refer you to one of them.

Rebecca Stewart

Rebecca Stewart

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