Today the Federal Reserve Announced the beginning of the end for their Quanatative Easing or QE program This Coupled with the increase of the G-Fee (Guarantee fee) increase of last week will definitely lead to some erosion in buying power.
Now I've got your Attenion and before you want to go jump off a bridge Hold on a Minute! All of this is good for the market and the economy. Lets Tackle these one at a time:
- The Tapering means that the Government and namely the Federal Reserve will be reducing
their influence on the Mortgage market which they didn't participate in until 2008 see chart. By buying into the Mortgage Market it's like printing money which is not good for the economy because it makes your dollars worth less.
- G-Fee is being increased in 2014. The G-Fee or Guarantee Fees is mostly a risk fee. So if you have excellent credit then (all things being equal) will receive a lower rate. (See Below) This is merely Fannie Mae and Freddie Mac passing the risk for higher risk loans to the borrowers. The increase in this fee will mostly be weighted to borrowers with higher risk situations.
- The Elephant in the room is the already announced QM or Qualified Mortgage regulations kicking on January 1st also. Generally it will lower the maximum Debt to income on most Conventional mortgage Loans from the generally accepted 45% and in some cases 50% to 43%.
These three combined items coming together at roughtly the same time will be viewed as a perfect storm by some. However in many ways it will chart the course towards more financial responsibility and stability in lending that has lead to more heartache than happiness.
Well that's my Take on if I'd liike to hear from you. Please soundoff on the comments below!
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