Nov. 21, 2011: FHA gets the nod, Fannie & Freddie don’t; flood insurance changes; NMLS update; investor news with the BofA timeline Rob Chrisman
Lots of people in the real estate & mortgage businesses make a lot of money. As we head toward Thanksgiving, sometimes it is a good thing to remember that many people around the world don’t. The video is six minutes long, but you can get the message after watching it for only two: http://biggeekdad.com/2010/10/two-dollars-a-day/.
The video focuses on people too poor to move, but here in the U.S. many can afford to move but don’t. A snapshot of 2010 showed that 59% of us lived in the same state in which we were born, per the Census Bureau. Louisiana came in 1st with almost 80% of its residents being born there, followed by MI (77%), OH, and PA. At the other end of things, AK, AZ, FL, NV, and Washington DC all had less than 40% of their residents being born in that state. (Nevada was less than 25%.)
Congress passed a bill, and President Obama signed it, that allows the FHA to back mortgages of up to $729,500, six weeks after the limit dropped to $625,500. The move makes it easier for more buyers to get low-interest FHA loans. Obviously members of Congress had trouble letting Freddie & Fannie take on any more risk given the billions in taxpayer money that have gone their way. The two agencies are politically toxic, but legislators felt pressure to re-raise the limit, so compromised by raising the FHA limit. Loans backed by Fannie Mae and Freddie Mac will continue to have a $625,500 limit. Loans that exceed the Fannie, Freddie and FHA limits move into the jumbo realm, as we know, where 30-yr mortgages carry higher interest rates and require 20% or more down. FHA programs usually allow lower down payments and are more forgiving of imperfect credit, but also carry higher fees, so more-affluent buyers tend to prefer Fannie and Freddie loans when they qualify for them. Critics are quick to wonder about extending a high LTV loan at a low interest rate under the FHA program rather than a Fannie or Freddie program, but so be it.
Through all of this, it is useful to take a quick historical look at how the government influenced Fannie & Freddie, and was instrumental in putting the U.S. housing & credit markets where they are today:
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