Wednesday, March 16, 2011

Mortgages Now More Expensive, Harder to Get, Take Longer....That's Government in Action Again...

Real Estate Industry News

Mortgage Proposals Could Cost Borrowers, Some Say

Mortgage loans could get more expensive, and harder to get, under proposals presented by the Obama administration to reform Fannie Mae and Freddie Mac, some consumer groups said recently.
The administration's proposals suggest varying levels of government support for mortgages. But only one of those proposals would maintain a strong role by the government for consumers in the mortgage market, according to the Consumer Federation of America, a nonprofit advocacy group.
Plans to rely heavily on banks and investors to provide mortgages, without much federal support, could lead to fewer long-term, fixed-rate mortgages, higher prices and less access to secondary markets for small banks and credit unions, the CFA and others said.
"The administration has laid out a series of options that could lead to the abandonment of a nearly 70-year commitment to affordable homeownership for working American families," said Barry Zigas, CFA's director of housing policy, in a news release.
Other administration proposals that might affect borrowers:
³Raising the minimum down payment for a Fannie- or Freddie-backed home loan to 10%
³Reducing the maximum mortgage amount that can be financed or insured by Fannie, Freddie or the Federal Housing Administration
³Increasing the fees charged by Fannie, Freddie and the FHA
It's important to note that the proposals are just a starting point for what is sure to be a lengthy discussion about the future of mortgage finance in America.
The Mortgage Bankers Association's chairman called the release of the administration's proposals "another important milestone on the road to stabilizing the mortgage market."
One of the concepts outlined by the administration resembles a previous MBA proposal, said Michael D. Berman, chairman of the MBA.
"Our proposal envisions an explicit, but limited, government guarantee of lower-risk mortgage-backed securities. The guarantee would be paid for by fees used to build a fund to protect taxpayers," Berman said in a news release. "This is the most prudent approach, one that places the primary risk on private investors and ensures sufficient liquidity during times of economic stress in order to provide affordable mortgage finance in all types of mortgage markets."
Reduced access to loans
For sure, if the government scales back Fannie and Freddie, and fees involved with government-backed mortgages rise, it will inevitably curtail the availability of affordable mortgage credit for some borrowers -- particularly people with marginal credit or little money to put down, said Greg McBride, senior financial analyst for Bankrate.com.
"The consequence of reining that in and expecting the private market to fill the void is that some consumers will find that credit isn't available -- and when it is, it will cost a good bit more," McBride said.
While broad changes to the government-sponsored entities could bring higher costs to consumers, mortgage costs have been going up already anyway, in the form of loan-level price adjustments from Fannie and Freddie and fee increases from the Federal Housing Administration, said Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information.
And with a private mortgage market nearly non-existent today, it's far from clear exactly how -- and when -- policies will change, he said.
"This is a pretty broad framework," Gumbinger said of the administration's proposals. But, finally, people in the industry have a framework on the table to argue about, he added.
"Hopefully, we can preserve mortgage markets that existing players can profit in, and move away from the excesses and polices that pushed us to where the market went as far as it could and fell over," Gumbinger said.
For its part, the National Community Reinvestment Coalition said the proposed policies could lock working-class families out of homeownership.
"There is universal agreement with the principle that people who cannot afford homeownership shouldn't be put in an unsustainable loan," John Taylor, president and chief executive of NCRC, said in a news release.
"However, the administration's proposal may be overly narrowing the window of opportunity for many blue collar and low- and moderate-income people from realizing their dream of homeownership."

By: Amy Hoak, www.marketwatch.com

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