Feds’ Practices Limiting Availability of Pricier – and More Lucrative – Homes

Are Freddie Mac and Fannie Mae unwittingly forcing agents out of their jobs?

Earlier this week, RE-Insider noted that the Obama administration was considering renting out Fannie Mae and Freddie Mac mortgaged homes acquired through foreclosure, essentially taking tens of thousands of homes off the market.

That takes care of many lower-priced homes that agents could otherwise be selling. Now federal rules may be taking pricier homes (with their more lucrative agent fees) off the market through a “one-two punch” of lengthy foreclosures and a reduced federal loan ceiling.

According to an analysis by USA Today, homes priced between $417,000 to $999,999 nationally were delinquent for roughly four months longer than less-expensive homes:

Loans below $417,000 are generally owned by mortgage giants Freddie Mac and Fannie Mae.

Their processes lead to quicker resolution than if loans are held by others. “It’s a much simpler process,” says Jason Kopcak, mortgage loan expert at Cantor Fitzgerald.

Bigger loans, often found on pricier homes, tend to be held by lenders or investors. Banks are “moving the stuff they don’t own first,” to satisfy others and limit litigation, says Paul Miller, analyst at FBR Capital Markets.

To add insult to injury, Fannie Mae and Freddie Mac “conforming” loan limits are scheduled to shrink from $729,750 back to $625,000 after Sept. 30. That means home buyers in higher-priced markets will be forced to search for jumbo loan mortgages from the few banks who offer these types of loans – all at higher rates and fees.

This reduction in the loan limit will dramatically shrink the buying pool and reduce home prices in pricier neighborhoods from San Francisco to New York.

Fortunately, there are legislators who are looking to extend the higher loan limit for the two government-backed mortgage agencies. While RE-Insider agrees this is desperately needed to shore up the struggling housing market – and will help hundreds if not thousands of real estate industry professionals continue to make a living – time is running short.

RE-Insider would like to know your thoughts. Have the feds inadvertently created a rigged game that’s keeping more expensive homes off the market? How will these events impact your business?