Jay’s Journal

New rules set by Freddie Mac April 15, 2007

Beginning in September, Freddie Mac will change its policies regarding the purchase of subprime adjustable-rate mortgages. From that point, loans with little down and very small payments up-front will undergo much tougher guidelines. It will not buy subprime loans unless the borrower is qualified to pay for the loan at its fully-indexed and fully-amortized rate, not merely a short-term, low-ball rate.

Also, there will be stronger required proof of financial capacity. For most borrowers this will mean showing tax returns and W-2 forms, and they will require lenders to collect money each month to assure that property taxes and insurance are being paid.

New mortgage-related regulatory bill approved April 15, 2007

The new Regulator Reform Bill legislation that would overhaul the oversight of government-sponsored enterprises (GSEs) – Fannie Mae, Freddie Mac and the Federal Home Loan Banks – has been approved by a vote of 45 to 19 by the House of Representative’s Financial Services Committee.

The law would create a new, independent regulator, the Federal Housing Finance Agency, to regulate the GSEs. Also, the bill creates an Affordable Housing Fund to support rental housing and homeownership for low-income families by using contributions from Fannie Mae and Freddie Mac, based on their total outstanding mortgages annually. The program would continue for five years.

Growing opportunities for real estate investors April 15, 2007

As most people know, real estate is a cyclical industry. Last year’s downturn in sales activity has motivated some real estate investors to turn away from more property acquisitions. However, some astute analysts say this is a very opportune time to invest, or start a real estate investment program.

“Owning some income-producing real estate, in addition to having a solid portfolio of other investments, can be a very good thing,” said Dave Ramsey, author of the book, “The total Money Makeover.” For investors willing to invest for the long term, owning properties can be a path to financial freedom for many, he noted.

Single-family homes make very good first properties because they don’t entail the same hassles and headaches association with multi-unit apartment buildings. Homes can be easily turned into rentals and are also much more affordable than, say, multi-family units like duplexes and triplexes, according to Robert Sheehan, economist for the National Apartment Association.

Home sellers are now more realistic with pricing, so the current housing market offers a lot more choices for buyers who get more for their money. That translates to more and better opportunities for investors.

Mortgage rates remain low April 15, 2007

Mortgage rates are remaining at near historic lows, keeping the “window of opportunity” open for home buyers and homeowners who want to refinance their mortgage. During the last week in March, the average rate for a 30-year, fixed-rate mortgage was 6.16 percent with 0.4 points (fees), according to Freddie Mac, a major government-sponsored buyer of existing mortgages. The average rate for 15-year fixed-rate loans is 5.86 percent.

“Recent data has been sending conflicting signals about the direction of the housing market,” said Frank Nothaft, Freddie Mac’s chief economist. “The rise in existing home sales in February to a 6.69 million unit pace, the highest level since last April, offered some hope of firming in housing demand. In contrast, February’s new home sales fell unexpectedly to 848,000 units, the slowest pace since June 2000, suggesting that more time will be needed before a housing recovery takes place.

“Despite concerns about possible spillovers from troubles in the subprime market, rates on 30-year fixed-rate mortgages remain stable. The low rates support affordability and aid in the ultimate recovery of the housing market.”