Did you know that 9 of the 10 mortgages currently funded in the United States are owned by the government? Private mortgage capital can be the main source of housing loans in the normal housing market. Now the government is planning a exit strategy.
The Administration submitted a mortgage reform plan to the Congress, outlining proposals that could significantly change home financing costs and sometimes affect real estate values.
The plan includes the following recommendations:
1. Fannie Mae and Freddie Mac
The new guidelines are aimed at phasing out Fannie Mae and Freddie Mac and returning private equity to the real estate market. The support of government agencies is at a pace that does not negatively affect the restoration of the housing market.
2nd Natural Mortgage Adjustments
The mortgage loan benefits that Fannie Mae and Freddie Mac have to end now require them to match mortgage interest rates with private banks or financial institutions to balance the terms of private equity investment.
3rd Reduce Maximum Loan Amounts
Congress is encouraged to reset the temporary rise of Fannie Mae and Freddie Mac to the levels set by the Housing and Economic Recovery Act.
4th Greater Downward Payments Needed
We offer bigger advances to home buyers. Increasing the size of the payments will reduce the risk of default, so each home loan with Fannie Mae and Freddie Mac will pay at least a 10% down payment.
5th Reduction of the loan portfolio
The reduction of the mortgage portfolio of Fannie Mae and Freddie Mac is recommended to be up to 10% annually.
6th Reduce the role of FHA
Congress is encouraged to let FHA's recent credit line increase recently. Additionally, add 25 basis points to the cost of FHA's annual mortgage insurance, and consider options such as reducing the maximum credit value.
7th Protecting Investors
Determining rules for more stringent disclosure requirements to help investors better understand the risks that are the basis of mortgage bonds and to create a Lending Agency that can more effectively regulate credit rating agencies.
8th Prepare for Possible Problems
We recommend that banks are better able to cope with future downturns, lower domestic prices and other sudden shocks, endangering the economy as a whole and tightened financial stability.
What would affect borrowers?
If these reforms really become reality, buying a home may be additional costs due to higher advances, mortgage rates and insurance premiums. Because of refinancing, it can be reduced for similar reasons and entitlement to mortgages becomes more difficult. Also, you may have large migration towards FHA loans.