One of today’s big financial stories is the new Fannie Mae and Freddy Mac guidelines taking effect. The new guidelines provide clarification for lenders on penalization, which could allow for a sizable increase in new loans.
Before the crisis, lenders often made mistakes regarding underwriting, statement of income, and accuracy of credit history. As a result of this, Fannie and Freddie, which provide guarantees to make investors whole if loans default, forced lenders to buy back loans made under false pretense. Lenders pushed back, stating that guidelines were unclear, that they were being unnecessarily penalized, and that the existing guidelines were arbitrarily enforced. They began imposing more stringent lending practices to shield themselves; this, in turn, led to fewer borrowers being able to qualify for loans.
With the new guidelines in place, lenders’ fears will be somewhat alleviated. With greater clarity about what could trigger penalties, borrowers are likely see faster turnaround times on mortgage applications, and applicants with lower credit scores are more likely to be approved. And, with the Urban Institute estimating that up to 1.2 million additional home loans would be made annually if mortgage availability was at a "normal" level, these changes could also have a huge impact on the nation’s economy.
Thinking of buying? Now might be the right time!
Angela Anderson, Realtor, Results Support Services: EMAIL — BIO
Licensed Associate Working with Sharlene Hensrud of RE/MAX Results, and HomesMSP — Sharlene, John, Angela
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