On October 1, 2011, the increased limits on mortgage loans that can be bought or guaranteed by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHFA) will drop back down and 1.4 million homes will no longer be eligible for lower interest rates on their loans[1]. While the measure was always intended to be temporary, organizations like the National Association of Home Builders (NAHB) warn that high-end properties will now require much larger down payments and will be much harder to sell on the open market. The result could be “more downward pressure on prices” on about 8 percent of the total U.S. housing market. Northeastern states, California, Florida and Illinois will bear the brunt of the change. Many analysts believe that the shift downward, while it needs to be made, may be premature in October. “The cost to the housing market and economy of a misjudgment would be high,” said chief Moody’s Analytics economist Mark Zandi in reference to the change.
“It’s concerning to me beyond just the fact that I’ve got a house on the market,” says one would-be home seller, adding that given that “our economy isn’t any great shakes,” she doesn’t think that the change will help the market or the economy recover since “we have a lot of unsold homes that we need to move”[2]. The higher limits have been in place since 2008.
Do you think that the government should extend the higher conforming loan limits, or do these changes need to be made now?
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[1] http://money.cnn.com/2011/09/19/real_estate/mortgage_threat_home_prices.fortune/index.htm
[2] http://bostonherald.com/business/real_estate/view.bg?articleid=1366722&position=0
In reponse to your most in depth article about frieddie mac.
It is fascinating to those of us who inspected freddie mac properties, how those properties were allowed to fall into such ill repair. A small investor would have his hands full, no materr how low the final price was. It became obvious that qualifying for these properties was of no concern to freddie mac nor was there any leadship in maintaining these loans and properties. Both freddie and fannie in many cases led to HUD. A sad state of mis manangement. Hopefully after all is said and done, a responsible attitude will prevail on these loans and properties. Maybe this business will be profitable once again. Thanks for your time.
As the owner of a mortgage company, it was great to be able to help home buyers and owners obtain Fannie Mae and Freddie Mac rates on loan amounts up to $729,000. I’ll hate to see it go away but really… do we really need government assistance for homes that cost over $500k?
The fact is, we now have access to numerous “portfolio” lenders that can easily fill the void left by Fannie and Freddie. Yes, the rates are somewhat higher. Also, higher down payments could be required.
We’ve been living with government assistance for so long on so many levels, we almost feel cheated when the government pulls out of one of their “stimulus” programs. But less government controls equals reality. Prices need to settle to wherever they will with no government intervention or at least, less of it. If that means we all pay a little more in interest, so be it. Housing values will adjust.
I couldn’t agree more with the above comment. There are private lenders as well as “Owner Financed” properties available market-wide that are putting new buyers into homes everyday. I susspect that when the banks and government figure this out, there will be multiple tax increases on investors that are using this strategy. I personally am already seeing this effect in selling mobile homes in my area of Georgia. (yes, I’m small-time, but an investor non-the-less). I feel proud that I am helping families get into home they can actually afford and avoid the fiasco of 2008. Home prices will adjust (barring a “SHTF” scenario) and if our government pulls their collective heads out their arse!