For the individuals out there looking to purchase, they are still running into obstacles, slowing down the process. Banks are being more cautious in lending which is not surprising. Non-warrantable properties are extremely difficult to finance (or need to purchase in cash) and is a growing situation. The increasing number of distressed properties versus resales is affecting home values (thus appraisals). Amidst all this, the Treasury Department’s Conference on the Future of Housing Finance met the other day and the future of Fannie and Freddie came up.
The government currently owns 90 percent of mortgages through Freddie Mac and Fannie Mae, which was bailed out by taxpayers at $148 billion.
Opinions still continue to vary at the extremes, from providing government guarantees to reduced government involvement and even for the government to leave the industry completely to private lenders.
During the boom, many buyers took advantage of FHA loans. Even in today’s market, products such as the 203k loan have become popular with many purchasers as they look to repair and rehab properties purchased out of foreclosure.
Fannie and Freddie help create a liquid secondary mortgage market allowing more loans to be originated, primarily by buying Federal Housing Administration (FHA) insured mortgages. If loans aren’t available (perhaps not as widely available as during the boom), individuals can have the choice of either saving up more for a down payment, or opt for renting, which were also discussed at the conference. This can further draw out the recovery process as absorption is slowed and less money flows through the system. Regardless of choices to be made, recovery won’t happen overnight, but if the current buyers out there can’t get funded this will make the recovery process just more excruciating.
Everyone seems to agree that something needs to be done, but just how to go about it remains a mystery.
Sherwin is a REALTOR® in the Chicago & Suburban area with @properties. Questions can be forwarded to Sherwin Sucaldito
”Future of Housing Finance” by Sherwin Sucaldito is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
Based on a work at Realty Evolved
