The Obama Administration delivered a report to Congress that provides a path forward for reforming America’s housing finance market. The idea of this is to
- Fix the Fundamental Flaws in the Mortgage Market.
- Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages
- To help creating a More Stable Mortgage Market
- To correct problems in mortgage servicing and foreclosure processing to better serve both homeowners and investors
The Administration’s plan will wind down Fannie Mae and Freddie Mac and shrink the government’s current footprint in housing finance on a responsible timeline. The plan also lays out reforms to continue fixing the fundamental flaws in the mortgage market through stronger consumer protection, increased transparency for investors, improved underwriting standards, and other critical measures.
What Plan details the following :-
- They will wind down the Fannie Mae and Freddie Mac and will bring private capital backing.
At the moment the Government are backing 9 out of 10 loans. However under ‘normal’ market conditions, Investor protection should be the main source of mortgage credit
- There will be an increase in pricing on Fannie Mae and Freddie Mac to make room for private capitol
Although the pace of these increases will depend significantly on market conditions, the Administration recommends bringing Fannie Mae and Freddie Mac to a level even with the private market over the next several years.
- Reducing Conforming Loan Limits.
To further reduce Fannie Mae and Freddie Mac’s presence in the market,the Administration recommends that Congress allow the temporary increase in those firms’ conforming loan limits (the maximum size of a loan those firms can guarantee) to reset as scheduled on October 1, 2011 to the levels set in the Housing and Economic Recovery Act (HERA).
- Phasing in 10 Percent Down Payment Requirement:
To help further protect taxpayers, they recommend requiring larger down payments from borrowers. Going forward, they will support gradually increasing required down payments so that any mortgage that Fannie Mae and Freddie Mac guarantee eventually has at least a 10 percent down payment.
- Winding Down Fannie Mae and Freddie Mac’s Investment Portfolios:
The Administration’s plan calls for continuing to wind down Fannie Mae and Freddie Mac’s investment portfolio at an annual rate of no less than 10 percent per year.
- Returning Federal Housing Administration (FHA) to its Traditional Role.
As Fannie Mae and Freddie Mac’s presence in the market shrinks, they will encourage program changes at FHA to ensure that the private sector not FHA picks up this new market share.
Although we do not know what effect bringing private Investors back in, this certainly indicates that Government backed loans will have higher rates and higher down payments. So, BUY NOW while we you can take advantage of FHA 3.5% down, low mortgage rates and house prices are still low.
To read the full article issued from HUD, Click Here
Source HUD US Department of Housing and Urban Development http://hud.gov