Melbourne Area Blog

I am asked frequently why it is so hard to get a mortgage these days. There is no one answer for that question.

It started many years ago when Congress decided that all Americans should be able to buy a home. That is when Fannie Mae & Freddie Mac, instructed by Congress (think Chris Dodd & Barney Franks) began loosening the restrictions to qualify for a mortgage. The bubble burst in 2006 -2007 and the fall out began. No need to get into falling homes prices, short sales & foreclosures in this post.

With the number of mortgages going into default, and new regulations on mortgage companies that took effect Jan 1st of this year, the private banks became more stringent in lending money. Most loans now require at least 20% down (oh the good old days! The purpose for this has always been so the buyer does have some equity in the home).

I wanted to share a few excepts from an article I read this week. It seems that the federal government is backing most mortgages today! Interesting...

"With little fanfare, the U.S. government has rapidly become the nation’s top backer of mortgages that require little or no money down, with taxpayer guarantees on them surpassing $1 trillion earlier this year, a FOX Business analysis shows."  

"The Federal Housing Administration alone has expanded loan guarantees to $865 billion in June, including some refinancings of existing loans – almost double the 2007 level -- according to an agency report."

"The Treasury Department has already pumped $145 billion into failed mortgage giants Fannie Mae and Freddie Mac, which generally have insured traditional “prime” loans requiring a 20% down payment and which themselves own or guarantee about $5 trillion in mortgages."

"Between Fannie, Freddie and the agencies, the federal government is now guaranteeing about 95% of all new mortgages, including refinanced loans, according to Inside Mortgage Finance."

Click here to read the full article:

http://www.foxbusiness.com/markets/2010/07/26/second-housing-crisis-t-taxpayer-money-risk/

No wonder Fannie Mae & Freddie Mac were excluded from the recent Financial Reform Bill signed into law. With more regulation it is unlikely that banks will be more willing to lend, leaving the government to back even more mortgages.