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End of the Real Estate Crisis?

Mortgage and Lending

Well, to some the end doesn't seem anywhere near. But, on the other hand, if you know what's happening behind the scenes you might think twice.

#1 - The Office of Federal Housing Enterprise Oversight (OHFEO) has once again reduced liquidity requirements for the two major GSE (Government Sponsored Enterprise), Fannie Mae and Freddie Mac. Becuase of this liquidity ease, rates on the new jumbo conforming loans, those mortgages over $417,000 to $729,750 dropped drastically this last week.

A $500,000 mortgage may have cost 7% the week before, can now be obtained at 6% or under. That's over a $300 difference in payment. This change will surely help home owners with equity refinance to reduce payments or consolodate debt.

#2 - Declining Market Policy Removed. Fannie and Freddie both announced this week that as of June 1st, 2008, the increased down payment requirements needed when purchasing a home in declining markets will be lifted. Previously, loan guidelines allowed for 95% financing. That was reduced to 90% for the last several months. This requirement is being lifted and things being put back the way there were.

Does this mean that Fannie and Freddie believe the worse of the decline is over? I would think so!

Now is one of the best markets to be buying real estate in. Prices are still down, financing is considerably cheap compared to historical averages, and it's easier to qualify once again.

Will the days of 100% stated income loan return? I doubt it, but these two moves are surely moves in the right direction to get housing back on its feet.