There are several proposals to reduce mortgage rates to help home buyers.The Treasury Department is listening to proposals from the National Association of Realtors and National Association of Home Builders to have a wide-scale reduction in interest rates to as low as 4.5%.  One of the proposals suggests that a government agency (such as the Treasury Department) could buy up 30 year mortgages below the market’s fixed rate of 4.5%.  Another proposal suggests that the government play a role in lowering interest rates to home buyers by as much as 1% or more by paying loan discount points or fees.  The whole idea behind these proposals is to bring large numbers of people into the marketplace to stimulate construction as well as move large numbers of unsold inventory quickly.  By doing so, this would help create jobs by increasing the demand for building materials, appliances, furniture, paint, etc.

This rate reduction concept isn’t a new idea.  It was used in the 1970’s through the government’s Tandem Plan.  At that time, the Government National Mortgage Association (Ginnie Mae) bought below-market mortgages from Fannie Mae who had aquired mortgages from thousands of lenders across the country.  So, instead of the private lenders and Fannie Mae eating the losses, Ginnie Mae absorbed them.  This was an effort to stimulate homebuying in a stagnate market.

The most recent proposal has been to have the Treasury Department lower mortgage interest rates for home buyers.  The government could then sell debt securities to bond investors at 3% and acquire privately originated mortgages at 4.5%, providing a profitable business model.  For more information on how these proposals can help you in the Hendersonville real estate market, please contact me today.

What does the government bailout mean for the housing market?

Are you left wondering what exactly the recently approved government bailout of Fannie Mae and Freddie Mac means for you, the homeowner or potential homebuyer?  According to Jay Brinkman with the Mortgage Bankers Association, this should signal the marketplace that there will be a floor on interest rates.  This means that, while the government continues to pump capital into mortgage securities, there is more money available for home mortgage loans at much more favorable rates.  However, this doesn’t necessarily mean it is as easy as it used to be to get a mortgage.  If you have lower than desired credit or are below the required income level for the loan you are trying to acquire, you will have difficulty getting that home loan.  The upside of this is that you won’t be allowed to buy outside your means, putting you in a potential cash crunch that so many families are experiencing today.  Provided that the bailout package is successful and creates much needed consumer confidence, the lower home prices and modest interest rates should kick the housing market into gear again.  Before the bailout plan, many financially strapped homeowners were headed straight for foreclosure.  Now, the government has temporarily put a halt to foreclosures to see if there is a way to work out a deal with those homeowners to repay the loan at terms they are better able to afford.  It may be months before we find out the exact details of what the government’s bailout means for everyone.  But, rest assured that the housing market will come back again.

FHA Offers More

July 25, 2008

FHA is offering help to more at-risk homeowners. Homeowners who are experiencing difficulty in making their mortgage payments due to adjustments in their interest rates may be able to refinance their home through FHA’s refinance program: FHASecure.
Although, the program was established a year ago, it seems that many homeowners are not aware that they may be able to refinance their home and avoid foreclosure.
FHA has temporarily increased its loan limits, which will allow the FHASecure program to help more families keep their homes. Due to the increase in the loan limits, you may still be able to qualify even if  your property has depreciated in value. The increased loan limit is  currently scheduled to end on December 31, 2008.
Homeowners at risk of defaulting on their mortgage payments (or currently in default), but have otherwise maintained a good credit history, may qualify for the FHASecure refinance program.
Contact an FHA approved lender as soon as possible to make an appointment to discuss your particular circumstances.

FHASecure Facts

FHASecure Questions and Answers

Related article: Homeowners Get Help for Mortgages at Risk