Something wicked this way comes…
Author: Administrator
In the past two weeks mortgage lates have risen to 9.64%. That number lets us know that things are not turning around.
Where this is interesting is where it will lead us to next three years. Starting December 12 Fannie Mae institutes their new more restrictive guidelines. These guidelines essentially make it easier to buy a house with 3% down than 20% down. Sounds contradictory however it is exactly what will happen. The max amount we will be able to qualify at will be 50% on the back end for a conventional, Fannie Mae, loan. So if you are purchasing a house and putting 20% down and your back end debt is 55% you do not qualify via Fannie Mae.
However if you are buying a home and putting a 3.5% down payment that is a gift from your grandma and you have $100 in your checking account and your back end is 55% you will qualify.
What? Right, here’s the deal. While Fannie Mae restricts the back end ratio on conventional loans, FHA is not making any effort to restrict theirs further. What this means is that more people will be doing government FHA loans. Oh and yes FHA as an entity is not doing well right now. They have a lot of bad mortgages…shocking right?
So based on the rising lates we have the potential for another wave of defaults, with the government stalling their release, and then ultimately turning theses defaults into new higher risk government loans. This sounds very expensive to the tax payer. Call me crazy but somehow this does not seem like a good plan. I seriously think that no one in our government has sat down and really looked at how what hand will do will affect the other. It seems more like they are constantly trying to put band aids on a gushing wound. In the long run it would be cheaper to stitchup the gushing wound instead of going through 4 trillion band aids. Just saying…
