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Fannie/Freddie to Fail...

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Mortgage and Lending with Bay to Bay Lending

The question at hand by most industry professionals has to do with the future/fate of Fannie Mae and Freddie Mac.  There is a lot of talk about the Government starting to phase out the financial support of Fannie Mae and Freddie Mac.  The main things being discussed right now have to do with phasing out these two governmentally backed entities.  At this point in time any serious discussion of this would seriously damage the current real estate recovery and many believe it threatens the current low mortgage interest rates.  This would also force lenders to improve pricing on short term fixed rate programs.   Most meetings and conference calls I have participated in during the past couple of days references a 5-10 year phase out period for any type of plans.  If this were to happen, lenders would want to raise rates on programs such as 30 Year and 15 Year fixed rate programs as they will not want to lock in their rate of return for that long.  This would also require more domestic and foreign investors into an investment arena where currently 80-90% of new mortgages are currently backed by Fannie/Freddie.  We would see a transition into much more ARM financing if this were to transpire.  There have been conversations out there that say there would be no 30 year fixed rate programs.  Perhaps 10 year fixed mortgage loan programs may be safe as with this short of an amortization period, there would be much less exposure for investors since there would be easy exit strategies with these types of loans.  On this short of an amortization period the borrower/investor has equity much quicker than a borrower on a 30 year amortization.  Let's see what the federal government decides to do with this situaion.

 

DJ Rondeau

Bay to Bay Lending, L.L.C.

501 South Dakota Ave, Suite 2

Tampa, FL 33606

813-489-5562- Office

813-480-6077- Mobile

813-464-2867- Fax

djrondeau@baytobaylending.com

www.tampafloridamortgagebroker.com

NMLS Originator ID: 218498

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