Many Americans desire the security of home ownership. Hopefully with these new changes, that opportunity can become a reality for more Americans.
In the early days of the housing crisis, a proposal was drafted that would make lenders hold a stake in the loans that they sold. This specifically applied to mortgages that had a down payment that was less than 20 percent. The idea that the government maintained was that this would encourage more cautious lending.
However, this plan was opposed by both the industry and the housing advocates. Both sides felt that this plan would lock too many people out of the housing market because lenders would be forced to raise interest rates and fees on loans with low down payments.
A New Proposal
In October of this year, a milder version of the plan was decided on by six different agencies. These changes are in response to the fact that the housing recovery has taken a lot longer than it was expected to. It has been acknowledged that the tough regulations were forcing lenders to only lend to those that had exceptionally good credit. This new proposal will hopefully encourage lending to a wider population of borrowers.
In light of this new proposal, both Freddie Mac and Fannie Mae have said they may lower the down payment requirements to 3 percent. The FHA may also be on board to lower the fees that they charge borrowers.
This also means that banks will not be required to hold a stake in the loans that have less than 20 percent down. They will only have to do so on loans where the borrower has a high debt-to-income ratio. While these changes will take effect in about a year, they will not apply to Fannie Mae, Freddie Mac, or the FHA. This plan affects loans that have been sold to private sectors, agencies that do not have government backing.
Owning a Home in St. Louis
The history of home ownership in America is rich. Prior to the Great Depression, a minimum of 50 percent was required as a down payment. However, after WWII, the government wanted to encourage home buying by significantly lowering the down payment requirements. They dropped to as little as 5 percent down for certain loans that qualified. The amount of people who could now qualify and own a home soared. This trend lasted for many decades.
Owning a home is still something desired by many Americans. Hopefully with these new changes, that can become a reality for more Americans.
Better Rate Mortgage has always made every possible effort to secure loans for St. Louis residents that they could afford. Having these new guidelines in place only solidifies our standard practices and gives borrowers more incentive to seek our TBA mortgage approval program. Call us today at (314) 361-9979.
