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Federal regulators propose higher mortgage costs

Posted September 19, 2011

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— The chief regulator of mortgage buyers Fannie Mae and Freddie Mac says restructuring the United States' housing finance system may require more mortgage insurance and charging lenders more, steps that could increase borrowing costs.

Federal Housing Finance Agency acting director Edward DeMarco said Monday at a conference in Raleigh that reshaping the mortgage giants three years after the federal government took them over involves spreading risks.

Reducing the risk to taxpayers, who have already invested $140 billion in Fannie Mae and Freddie Mac, may mean private interests take on more. DeMarco said that could include requiring more private mortgage insurance from borrowers and higher fees from lenders to guarantee loans.

"I think there are always challenges. There's always conversations. We're working them out very well," said Michael Williams, president and chief executive of Fannie Mae. "We have a good relationship with the regulators, and we're all trying to do the right thing, which is most important."

DeMarco said the changes would be phased on gradually to avoid shocking the sluggish housing market.

Sold sign, housing sales, home for sale Officials want to shift mortgage risks from government

Local lenders said the added hurdles likely wouldn't scare off potential home buyers if interest rates remain close to record low levels.

"There's not enough news that came out negative (Monday) that should bother anybody about buying a house or refinancing," said Kelly Fox of Towne Mortgage, noting that lenders already require much more documentation for a mortgage than in years past.

According to Triangle Multiple Listing Service, home sales in the area were up 23 percent in August over last year, and pending sales were up 22 percent. Both indicators have been rising in recent months.

DeMarco said the most pressing tasks include creating a framework allowing more borrowers who are underwater on their mortgages to refinance now at rates that are at levels not seen in decades.

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  • ncguy Sep 20, 2011

    billo I think you have it backwards
    If you have 20% equity than you don't need PMI

    If not PMI covers the whole thing.

    funny thing about this article is that anyone who still has a house are not the ones you need to deal with

    it's those that lost their home becuase of irresponsibilty or whatever.

  • barbstillkickin Sep 20, 2011

    You mean to tell me they are not high enough. Looks like renting is a person's best bet.

  • wa4dou Sep 20, 2011

    There are smart and practical rules in life that dictate we should live below our means and save money for a rainy day. Often the young can't appreciate why and the old do.

  • bill0 Sep 20, 2011

    "Anyone else wonder why mortgage insurance costs millions of people $50 each month... and yet the entire market crashed when many of these same people defaulted.... where was the insurance? "

    The insurance was there. The problem is that PMI only covers 20% of the home value. When the market dropped more than 20%, suddenly lenders were on the hook for a lot of money that insurance wouldn't cover.

    Additionally, lots of this money is on second mortgages and HELOC's. PMI only covers the original mortgage and the rest just ends up as a loss to the lender.

    "But my question is, if WE can't qualify for good loans anymore, exactly WHO can?"

    Uh - people with good credit? Your payment history shows that you are a risk. Lenders will charge you are higher rate to account for that risk. That is the way it should be.

    BTW - the # of homes on the market should be of no concern to the government. That isn't their job.

  • wa4dou Sep 20, 2011

    "Thought about refinancing our 15year loan 5.125% that we have 7 years left on to a 5 year ARM at 3%. Two years ago I was out of work and had 4 late credit card payments. Never late on mortgage. Now, with two incomes, and 65% equity in house, we can't qualify for lower rate because of my late pays. We will just accelerate payments and be done in 5 anyway. But my question is, if WE can't qualify for good loans anymore, exactly WHO can?"

    Actually you may be better off going the route you plan to pursue. I too have about 6.5 years remaining on a 5.5% 15 year loan and wanted to pursue a similar course. I found closing costs to be about double what they were 13 years ago and decided that accelerating payments would accomplish nearly the same goal. When you up the amount monthly going to principal, you effectively cut the yield to the lender; same as cutting the interest rate. -

  • RB aka Spirit Warrior Woman Sep 19, 2011

    meeper - "Comrade Obama is just putting the final marxist nails in our coffins."

    Question: What's he got to do with the FHA?

    Answer: Nothing.

  • gingerlynn Sep 19, 2011

    Thought about refinancing our 15year loan 5.125% that we have 7 years left on to a 5 year ARM at 3%. Two years ago I was out of work and had 4 late credit card payments. Never late on mortgage. Now, with two incomes, and 65% equity in house, we can't qualify for lower rate because of my late pays. We will just accelerate payments and be done in 5 anyway. But my question is, if WE can't qualify for good loans anymore, exactly WHO can?

  • RB aka Spirit Warrior Woman Sep 19, 2011

    With the glut of homes on the market, ARE THEY CRAZY!?!

  • meeper Sep 19, 2011

    Comrade Obama is just putting the final marxist nails in our coffins. We've let career politicians from both parties ruin this country.
    The same seems to be happening with local governments in Durham and Orange countries. Look at your property tax bills!

  • Rebelyell55 Sep 19, 2011

    Don't think this is the brightest move for them to make....

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