Federal Housing Finance Agency Unveils Plan to Loosen Rules on Mortgages

Who says we learn from history???

For last three years, home prices were low and there was little risk for lenders. When home prices are low, there are less chances for default. Loans are safer. Banks and lenders stayed away from lending to any risky borrower. Now when the housing market has recovered and is showing some sign of fatigue, they are now getting in to sub-prime mortgages!! Somehow in US, we need to keep economy growing ;) We can't afford RE market to cool down.

Genuine buyers who could have been helped better when prices were low were neglected at that time. Investors and traders seized good bargains at the expense of those needy families. Now home prices have gone up, investors and traders, private equity firms and hedge funds are looking for ways to off-load their inventory. What is a better way then loosening credit policies now and encouraging ( read as trapping) those poor fellas into buying those same homes at increased prices!

***********************************

For years, politicians, housing advocates and potential home buyers have complained that tight credit policies after the housing market crash have kept too many deserving people from qualifying for mortgages.

Now the government is taking steps that it says it hopes will allow more first-time buyers and lower- and middle-income Americans to get home loans at low rates.

On Monday, Melvin L. Watt, the nation's chief housing regulator, announced a program offering more reassurances to mortgage banks that fear they could suffer unpredictable losses on the loans they sell to the government.

Separately, he disclosed that efforts are underway to allow borrowers to receive government-backed loans with much smaller down payments than are now required. But contrary to early expectations, he offered few details on such plans.

"We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner," said Mr. Watt, director of the Federal Housing Finance Agency, which regulates the mortgage finance giants Fannie Mae and Freddie Mac.

The move in large part is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and buy back bad loans sold to Fannie and Freddie. To avoid having to make those payments again, many lenders now demand that borrowers meet stricter requirements for loans, known in the industry as overlays.

Full article at:
http://www.nytimes.com/2014/10/21/business/economy/federal-housing-finance-agency-unveils-plan-to-loosen-mortgage-rules.html?_r=1