In my June 19 blog post, I mentioned that Fannie Mae and Freddie Mac had a new overseer (conservator), and he was talking about making it easier for Americans to buy a home. After years of super-conservative mortgage lending, Mel Watt told the world he was going to try to help more people buy a home in the United States.
I’m always skeptical about statements that come out of Washington, D.C. I learned a long time ago that just because someone in D.C. says something, it doesn’t mean that anything will come of it. But at the same time, I still remain naively hopeful that occasionally someone in Washington will actually do what they promise.
It appears that Mr. Watt might be just such a person.
In an Oct. 17 article, the Wall Street Journal reported that Fannie and Freddie and their regulators were close to an agreement to “greatly expand” mortgage credit and give some much needed protection to mortgage lenders.
The article reported it would be easier for lenders to offer mortgages with just a 3 percent down payment again. The new policies will be designed to ease lender fears of regulatory and legal punishment if they make a home loan that subsequently becomes delinquent.
This is a big deal.
The housing market is a vital component of the U.S. economy. We need to sell more homes, and we need to build more homes. Part of the reason new and existing home sales haven’t grown in 2014 as fast as expected is that it’s still too hard for qualified buyers to get a loan. Many people in the United States simply don’t have the funds for a 20 percent down payment.
If these changes are made, then it will open up the home purchase option to many Americans who currently can’t get a mortgage. Existing home sales will increase. New home sales will increase. New home construction will increase and create lots of new jobs.
Our economy could use a shot in the arm. A more robust housing market is about the most potent shot it could get.
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