Isn’t the loosening of standards what caused the trouble we are in originally?
Fannie Mae has announced they are loosening the standards to try to allow more homeowners to refinance. While I personally think that this is a little nuts right now, it probably comes from from the two different points of view.
I think that housing is getting close to it’s natural recovery. Others think we are on the precipice of a total meltdown. If a meltdown of the housing inventory is what they are trying to avoid, then this stimulus from Fannie Mae makes sense.
If we are not, too much stimulation may cause even more problems down the road.
Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site. The changes apply to loans that the company owns or guarantees. Bloomberg.com
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Ya know…I read this a couple of days ago too and thought the very same thing – “isn’t this what got us here in the first place?”. We are seeing signs of the market turning around in our area already. Is this something we really need to experiment again???
The big picture objective seems to be to stem the foreclosure avalanche by allowing homeowners a bit more leeway to refinance a mortgage. Stopping foreclosures is a key element in turning around the real estate market. It would halt price erosion that is now hurting the banks to no end. And it would bring back buyers when they see that prices have stabilized.
It seems the Feds are walking a fine line here. While I agree that loosening will help in the short term, I believe they need to be very careful to not let this get out of control again. I don't envy our current leadership at all. Very tough decisions ahead.
You couldn't be any closer to the truth. The Feds aren't looking far enough into the future. Haven't we been here before?
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