24
Feb
12

The END of the 30-year mortgage?

The 30-year mortgage is now at historically low-interest rates, but some say that long-popular financing tool could become a thing of the past if Fannie Mae and Freddie Mac disappear.

In CNN’s January 26th GOP primary presidential debate, the four remaining candidates each discussed how they would phase out or break up those two huge quasi-governmental entities that secure nearly half of all United States mortgages.

Losing the 30-year mortgage along with tighter lending standards worries housing expert Brad Hunter, chief economist with Metrostudy.

Although that may have little effect on people with enough income to pay for a home in cash or make a large down-payment, he argues, it rules out many traditional buyers.

“The scenario is if Fannie and Freddie go away, lenders will have to be content to hold mortgages, or some private entity will have to be content to hold mortgages. And there’s so much risk in holding a security with such a long duration, that the private sector when they step in won’t be willing to go back 30 years…

“(The federal government) is tightening lending standards and that goes for the Federal Housing Administration to the Dodd-Frank (Wall Street Reform and Consumer Protection Act) legislation that is causing a great deal of uncertainty right now because there are many aspects that haven’t been clarified…

“One of the provisions (of the Dodd-Frank Act) is Qualified Residential Mortgage. One of the things that has been discussed is in order for it to be a QRM the buyer has to put down 20 percent.

“There are certain buyers who have cash to make a large down-payment; however, there are a lot of people who really struggle to make a down-payment, and that’s the whole middle class.

“Fannie and Freddie allowed the 30-year mortgage to come into existence and be practical. The original lender could write the loan and sell it to Fannie. If they have to originate the loan and keep it without selling it, they won’t be willing to hold a long duration. It’s not that it would be illegal it’s just they wouldn’t want to do it.”

How do you think this will affect your business???  Title Junction would love to hear.

This article brought to you by:  Evan Williams with Florida Weekly

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Jennifer Ferri, Owner

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