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The talking heads have been weighing in on a new report that came out today by the Treasury Dept. This report is called the “White Paper”. The White Paper report is going to be given to your elected officials so that they can figure out how to get the pseudo-government entities of Fannie-Mae and Freddie-Mac out of the mortgage business. The government wants to lower their risk of owning so many mortgages by steadily increasing fees enough to make their mortgage impractical to get by the consumer. This would then encourage the private market to ride in on their white horse and fill in this void. The plan calls for a long term phasing out of the government rather than a rash exit.
This report also suggests that government backed mortgages would have tighter guidelines making them tougher to get. For example they are purposing to lower the conforming loan limits already in place and requiring a higher down payment (likely 10%). The government would still be able to prop up the mortgage marketplace in case of catastrophic financial events similar to that of Sept 2008 collapse.
What does this all mean to you. Short term, probably nothing because the legislation has to be passed by the government and they say that may take 2 years. Long term though, it shows that the government wants you to have more equity in your home so plan for larger down payments in the future and more costly loans. Stay tuned…. Josh
