Good news for homebuyers, government regulators Fannie Mae and Freddie Mac are making it easier for Americans to obtain mortgages. Federal Housing Finance Agency Director Mel Watt announced that he would hold off on the reduction in the size of loans firms can buy and will not be reducing financing for apartment building loans as previously planned.
Instead of shrinking their role in the housing finance market as predicted for 2014, Watts is strengthening the role of these government agencies and first time home buyers chances of securing a mortgage. Freddie Mac and Fannie Mae guarantee about 60% of all home loans in the U.S. and will be easing buy back standards for banks when loans become faulty, encouraging banks to ease tightened lending restrictions. Reuters suggests this could help open the credit taps. Some worried cutting conforming loans this year would hinder an already weak market and keep economic growth down for the year.
This new decision then is lifting those fears and worries. Watts said, “FHFA will not use its authority as conservator to reduce current loan limits,” Watt said. “This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market.” Jaret Seiberg, senior policy analyst at Guggenheim Securities, confirms that this new decision is a step in the right direction. “The path Watt has laid out is positive for mortgage originators, mortgage insurers and homebuilders.” There is also a pilot program in Detroit aimed at helping underwater borrowers refinance their home loan. Watts says the FHFA homes to expand this program nationwide.
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