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For this month's market minute, I want to discuss some big news from the Federal Housing Financing Agency, or FHFA. This is the agency that oversees the housing market, as well as Freddie Mac and Fannie Mae. The FHFA determine how much money is going to be offered for loans, what type of borrower programs are out there and how banks are involved in lending money to borrowers for housing.
The FHFA has recently come to Freddie Mac and Fannie Mae and said that they want to increase their exposure. How they plan to do this is by having both Freddie Mac and Fannie mae go to banks and encourage them to give out more loans, even if they seem to be a little risky. The way the FHFA are going to get them to do this is by guaranteeing insurance on these risky loans if something goes wrong with them. This will make banks more comfortable with giving out that loan.
What this will do is allow more people to qualify for loans that may have not qualified before due to low down payments, low credit scores, and high debt to income rations. This could lead to housing prices increasing due to more buyer activity in the market. This is not an unprecedented tactic from the FHFA. Starting in 1999, they used a similar tactic that increased home ownership up until the housing market crashed in 2009.
It will be interesting to see how this works out. It is worth noting that we seem to be circling back around to where we were 10-15 years ago in terms of the number of housing loans being given out and also the number of people who qualify. If you have any questions about this topic, please feel free to contact my team by phone or e-mail and we would be happy to answer them for you!
Thanks for watching and have a great day!
