In recent weeks we’ve seen home sales jump, foreclosure starts drop and most recently mortgage rates have hit a yearly low. It would seem that things are beginning to look a little brighter for markets across California, but the good news doesn’t end there. Fannie Mae and Freddie Mac have recently reached a deal to ease lending restrictions, a major victory for those impacted by the ongoing affordability crisis and a step towards a healthier market in 2015.
Recently, mortgage giants Fannie Mae and Freddie Mac came to an agreement with the FHFA aimed to loosen the lending standards that have pushed many would-be homebuyers off the market. Soon, those who have a less than perfect credit should find it easier to qualify for a loan, and mortgages should become more affordable for the masses.
According to the new policy, it will be up to the financing firms to establish when banks are required to repurchase loans. Furthermore, the change in policy will reduce the minimum down payment required to qualify to sell a loan to the Fannie or Freddie, dropping from 5% to 3%.
The change is likely result of heavy criticism directed at banks for over tightening loan standards in an effort to avoid liability for loans they sell to Fannie and Freddie. The new guidelines are aimed to assure lenders that they won’t regret taking on higher-risk loans.
What’s more, this news all comes just days after mortgage rates hit a yearly low. The average rate on a 30-year fixed mortgage hit 3.92%in the second to last week of October, 0.21% below the same time one year ago and the lowest point since June 2013.
Do you think the recent change in lending standards will be enough? What are your thoughts?