Today I received an email from a subscriber to The Housing Guru, asking: “How will the new Fannie/Freddie rules affect home ownership?” The writer planned to purchase a home in the next 3 to 5 years and wanted to know if the mortgage process would get easier or more difficult because of the changes being discussed.
My response was based both upon recent news stories as well as statements from Treasury, which lead me to believe that the government has no plans to make the mortgage process easier for homebuyers. I believe the opposite is true. As the government rolls out its tentative plans to “fix” the mortgage market, one thing seems certain: mortgages will become more expensive and will be more difficult to obtain.
Last year the Administration stated that it planned to reduce emphasis on home ownership and to place more focus upon renting. And the news from today’s release of the proposals for revamping Fannie Mae and Freddie Mac seem to forecast a more difficult environment for future home buyers. Future loans will cost more in fees, will require larger down-payments, will be more difficult to obtain; and we will probably see interest rates on home loans rising during the next few years.
And while implementing the new plans for Fannie and Freddie will likely take at least five years, we’ve already begun to see the impact that significant changes will have on the housing market. Regardless of the details of the final plan, the new Fannie/Freddie Rules will likely create more renters and fewer owners than we’ve seen in recent years.
Will the new Fannie/Freddie rules affect home ownership? Yes, and I don’t believe the results will be positive. Those considering a home purchase in the future should begin saving for their down- payment and fees, and should protect their credit rating in order to have the necessary funds and to be able to qualify for the mortgage loan of the future.
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