This is part of a bigger article published by Lowe's thru Inman on Lowe's newsletter. This article shows how one side is trying to help out the real estate market and the other side is still in panic mode. This panic mode is hampering any real kind of improvement in the economy. This is not fun for us in the industry if you are a loan officer or real estate agent.
Unleash Fannie and Freddie
Since the crisis, Fannie and Freddie have been working at cross purposes to the Federal Reserve. The Fed has countered economic weakness by forcing down long-term interest rates, including mortgage rates, to all-time lows. But Fannie and Freddie have made it increasingly difficult for potential borrowers to qualify, and cut the number who qualify for the very best rates to a trickle.
To get the lowest rate possible on a loan directed to the agencies, a borrower must have a loan-to-property-value ratio of no more than 60 percent and a credit score no less than 700. The property must be single-family but not manufactured, occupied as a permanent residence by the borrower, and in an area not subject to an "adverse market delivery charge." The mortgage cannot have an interest-only provision, and any second mortgage has to be included in the 60 percent limit.
Millions of refinance transactions that would increase the spending power of homeowners, which would have been funded in prior recessions, are not getting funded today. Either the borrowers no longer qualify, or they don't qualify for rates low enough to help them.
Two strategically important groups have been particularly hard hit. One is the self-employed, predominantly small-business owners who are a major potential source of employment growth. The other: investors who buy homes to resell at a profit, and who are desperately needed right now to buy foreclosed homes sold by lenders. Specific proposals related to these groups are discussed later.
Unleash Fannie and Freddie
Since the crisis, Fannie and Freddie have been working at cross purposes to the Federal Reserve. The Fed has countered economic weakness by forcing down long-term interest rates, including mortgage rates, to all-time lows. But Fannie and Freddie have made it increasingly difficult for potential borrowers to qualify, and cut the number who qualify for the very best rates to a trickle.
To get the lowest rate possible on a loan directed to the agencies, a borrower must have a loan-to-property-value ratio of no more than 60 percent and a credit score no less than 700. The property must be single-family but not manufactured, occupied as a permanent residence by the borrower, and in an area not subject to an "adverse market delivery charge." The mortgage cannot have an interest-only provision, and any second mortgage has to be included in the 60 percent limit.
Millions of refinance transactions that would increase the spending power of homeowners, which would have been funded in prior recessions, are not getting funded today. Either the borrowers no longer qualify, or they don't qualify for rates low enough to help them.
Two strategically important groups have been particularly hard hit. One is the self-employed, predominantly small-business owners who are a major potential source of employment growth. The other: investors who buy homes to resell at a profit, and who are desperately needed right now to buy foreclosed homes sold by lenders. Specific proposals related to these groups are discussed later.
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