Recently, a bill has been proposed to wind down Fannie Mae and Freddie Mac, which are both enterprises sponsored by the government in the mortgage finance industry. This bill proposes to reform the market for mortgage financing. With the changes, mortgage insurance would be a different vehicle than loan guarantees though market-based pricing.
What is the New Legislation?
This legislation was proposed by several Democrats in the US House: Jim Hines, John Carney, and John Delaney, and it is being called “The Partnership to Strengthen Homeownership Act.” This legislature would create a new program known as “Ginnie Mae”, which would work through the Government National Mortgage Association to develop a new program for insurance. Through this insurance program, the first 5% of mortgage risk losses would be transferred to the private sector, and then losses beyond that point would be handled by private insurers and government.
This legislature is being watched by mortgage lenders, because it could impact the way mortgages are handled. Another proposal is to issue mortgage-backed securities with a standard securitization plan through Ginnie Mae. Market participants could be held to rules that were developed through capital standards and stress-testing to determine the current lending standards.
When the Changes Will Happen
If this proposed bill is passed, Fannie Mae and Freddie Mac would be phased out. With the phase-out process, government investments would be repaid as the assets are moved into the private sector. The transition would take an estimated five years until the new program is fully in place.
During the housing meltdown in 2008 – 2009, Fannie Mae and Freddie Mac were paid $187 billion of taxpayer money. All of that money has already been paid back, as well as another 3%. So, these programs have already recovered from the bailout. The new proposed legislation would change the future of mortgage financing, to hopefully prevent potential problems.
Earlier this year, another bill was passed that impacted mortgage giants. This other bill was written by Mike Crapo and Tim Johnson, but it is looking at tough competition because of hedge funds and investors.
Working With a Home Loan Company You Trust
Getting mortgage financing is a lengthy process, and if you are in the market to buy a house, then it is important that you are working with a home loan mortgage company you can trust. Working with a mortgage lender that is up-to-date with current trends and changes in legislation will help you to have the peace of mind to know that you are being protected.
If you are a mortgage originator, then it is important that you are staying notified of these changes, so that you are originating & disclosing on loans correctly. Having a wholesale or correspondent lender as a resource is a great way to stay notified when the changes are implemented.
Here at DaveKevelighan.com, you can access information about guidelines, and this information provides a wide variety of home loan programs for you to work with as you are dealing with prospective clients. For more information, please call me anytime at (303) 520-0004.
