New Fannie Mae Changes
There are many articles out this morning on another ‘earthquake’ that is getting ready to rattle the housing market. As though things have not been hard enough for struggling homeowners in the past few years, Fannie Mae is getting ready to shake up our world again. As many of you know, Fannie Mae is (simply stated) a Government-Sponsored Enterprise (GSE) that works with lenders to make sure that loans are available to the public at affordable rates to purchase homes. The idea is that they are to provide affordability and stability to our housing market.
Recently Fannie Mae has asked the federal government for an ADDITIONAL $6.2 BILLION in funding, bringing the total of what they need for their ‘rescue operation’ to over $100 BILLION. The current administration does not believe that expensive areas (like Monterrey, California) should have the same backing that less expensive areas (Boise, Idaho) have, and by the end of summer, Fannie Mae limits on federally backed loans will drop considerably.
In places like Monterrey, CA, where a large portion of what is selling is foreclosures, this will have an enormous impact. In this area of expensive homes, government limits will drop about one third, from approximately $730,000 to $483,000. National Association of Realtors President Ron Phipps is concerned that by reducing these limits, it will put an even greater downward pressure on falling prices. Less expensive areas will fall about fifteen percent to a maximum allowable Fannie Mae backed loan of $625,500.
Is this a disproportionate slam to people who live in expensive areas? Absolutely. Not part of a healthy recovery plan. And it could have a serious impact on all housing markets while the private sector (which is having more and more restrictions placed on it) scrambles to readjust to these new regulations.
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