Over the past few weeks there has been a lot of discussion about the future of Fannie Mae and Freddie Mac, along with the direction of FHA.   This is important to all of us in the Housing Industry, as currently the US Government either insures/guarantees or purchases about 90% of all Mortgages originated today. I think we are all in agreement that we would like to see Private Capital come back into the marketplace, but at this time that is coming very slowly.   There is no doubt that some changes should take place, but timing is going to be critical.   Having the Government pull back to soon and the Housing Recovery would be slowed even further.

Realistically to do away with or privatize Fannie and Freddie it will take a few years.  What you may start seeing soon is for FHA to reposition itself back to it’s original mission:  To promote homeownership among low and moderate income borrowers. We have already seen that in April FHA is increasing it’s monthly MIP to 1.15% from .9%, this is to further stabilize FHA overall.  What you may see later in the year is for the loan limits to decrease back to 115% of median home prices, currently the limits are calculated at 125% and in some areas there are special limits for high cost loan areas.

Fannie and Freddie are also likely to reduce their loan limits to a maximum of $625,000 from the current high in some areas of $750,000.  There is no word yet however if they will consider decreasing the $417,000 overall loan limit.

Whatever the outcome, it is imperative that we stay on top of the proposed changes and talk with our elected representatives to ensure that the Government does not pull back it’s support too soon.

By Chris Cope