Services for Real Estate Pros

Original content by Lenn Harley 303829;0225082372


My experience working with home buyers for many years says," NO".

John Mulkey brings news of new Fannie Mae rules for consumers who have experienced foreclosure, short sale or "deed in lieu of".  See:  New Fannie Mae Policy May Offer Hope To Struggling Homeowners

This is like throwing a few crumbs to a herd of Buffalo.  A few will benefit, but the herd will starve. 

Once a consumer's credit has been impaired to the degree that a foreclosure, short sale or "deed in lieu of" hits their credit report, the interest rates they'll have to pay for any credit will necessarily limit the availability of any future credit.

The most significant limitation to mortgage qualification is the amount of the down payment required.  The ability of a consumer to finance real estate is directly related to the cash required to close.  For every uptick in the interest rate charged or down payment required, the number of consumers who qualify for mortgage approval is reduced. 

This is fine for the folks who live by the "skin in the game" mantra.  However, IMO, the concomitant limitations on the availability of credit is what is going to cause the housing industry to remain moribund for a decade or more.  Fannie Mae may be offering crumbs to future buyers today, but the benefit to most who have a foreclosure, short sale or "deed in lieu of" on their credit report will be negligible, as has been any of the previous "brain storms" of the Fannie Mae functionaries who haven't a clue of what makes the housing industry tick. 

The dynamics of mortgage finance is far more complicated than offering a "window of opportunity" to consumers who have multiple barriers to mortgage fiannce.  These new "rules" are far more exclusive than they are inclusive. 

Courtesy, Lenn Harley, Broker,, 800-711-7988.

                                          Loan Application

"I see that you sold your previous home by Short Sale.  You'll have to increase the down payment for your new home purchase from 10% to 20%. 

Based on your savings rate, you should be able to buy a home in about 5 years."

Comments (3)

Bill Dean
Haggerty Team St. Louis, Mo. - Fenton, MO
William Dean - Broker, Salesperson

I have to come down on the side of Fannie Mae on this one!  Letting tooo many people buy homes with little or no "skin in the game "  was a big part of what put us in this mess.

May 10, 2010 06:30 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

All that you say is true.  Remember if banks want to lend on homes then the rules will change and those who have the negatives on their credit will be over looked.  It is the way it works.  Remember, aroung 24% of the people currently are in default so if you add that to those who lost their homes and short sold them it is getting closer to 40%.

May 10, 2010 06:45 PM
Payam Bakhaje
DC Realty Online LLC - Washington, DC
Licensed in DC, MD and VA

That is really scary . However, these info are on Nation. Area to area is different. Thank you so much for sharing.

Sep 25, 2011 03:40 AM