Real Estate Marketing & Beyond
The US housing market is in a virtual state of deadlock, as people who would previously have been regarded as prime borrowers now fail to qualify for home loans.
Tighter lending standards have stifled the US housing market. Image courtesy of Active Rain
Fannie Mae and Freddie Mac have imposed the strictest lending conditions for over a decade, and while record numbers of Americans would love to buy a home, they cannot get the necessary finance. This is hampering a recovery in the real estate market. In addition there are continuing enquiries into foreclosure procedure practises, and the loan modification program which was designed to keep people in homes has failed to live up to the hype.
Since Fannie Mae and Freddie Mac were taken into state control in 2008, they have tightened over a dozen mortgage qualifications, including down payment requirements and credit scores. These restrictions were put in place after the government gave out over $16.2 billion in homebuyer tax credits to stimulate demand, while the Federal Reserve purchased over $1 trillion of mortgage bonds to keep down borrowing costs.
Lots of people would like to buy, but few have the opportunity. Image courtesy of Static Guim
The lending requirements set by Fannie Mae and Freddie Mac tends to be followed by all the major banks. Apparently nine out of ten mortgages bought in the first quarter by Fannie Mae were by borrowers with credit scores higher than 700, while in 2003 this figure was just over two thirds.
So by deploring a return to standards which preceded the housing bubble, should we presume the author thinks that housing bubble installer standards should return? That's what I'm reading: bring back option ARM no-doc liar loans at 110% LTV. Well that sounds like a GREAT idea.
We provide a detailed analysis of the Loan Level Pricing Adjustments that Fannie and Freddie use to tighten restrict credit. The impact on consumers is significant. You can read the report A New Hurdle to Homeownership at http://www.cra-nc.org.