Fannie Mae Changing Lending Practices

Fannie Mae which is a very large financial institution has announced that the company is changing its lending practices. This comes after many financial institutions have come under fire for their lending practices due to the number of foreclosures caused by predatory lending practices.

The financial institution is now going to make it harder for people to get loans and lines of credit. They are going to increase the minimum credit scores that are required by consumers to qualify for a loan.
Many consumers who easily qualified for loans with low credit scores have become overwhelmed with their payments due to the economy. Many people are now unemployed and cannot keep up with their monthly loan payments.

Fannie Mae will implement its new automated lending system on December 12, 2009. The system will now automatically reject borrowers who wish to take out loans who have a credit score that is lower than 620. The company had a previous system that only rejected borrowers with a credit score of 580 and below.
The credit score of 620 was chosen because borrowers who had a lower score than this one were nine times more likely to default on making their monthly loan payments.

There are also income restrictions for borrowers who are making a down payment of at least twenty percent towards their loan balance. Borrowers now cannot spend more than forty five percent of their income to pay their monthly payments and other expenses.
This news is actually very beneficial to borrowers and the financial industry as a whole. Many financial institutions who loan money to consumers often lose money because the borrowers default on their loans. This can hurt their bottom line which in turn causes the bank’s profit margin to decrease substantially.
Too many borrowers get in over their heads because they want to live above their own means. Many people think that taking on a lot of debt is not a big concern because they will pay the balance off over time.

The problem is that the economy and job growth in the United States has slowed down a lot. This means that employers are laying off employees and are not increasing their employees’ wages.
Consumers also need to help the financial industry recover by making sure that the budget before taking on a large monthly loan payment. By having a healthy amount of money in a savings account, consumers can prepare for the worst. Having a few months worth of expenses can ensure that financial obligations are met.
Other financial institutions can learn from Fannie Mae’s new stricter lending practices. Everyone needs to take responsibility for their own actions so that money can be lent in a way that is good for consumers, the financial institutions, and the financial market as a whole.

Government Help refinancing jumbo Mortgages

Is there any government help available for refinancing a Jumbo Mortgage?

What is a Jumbo Mortgage?
A Jumbo Mortgage, previously, was a mortgage that was more than $417,000. A loan of less than that could previously be refinanced through Fannie Mae and Freddie Mac. A loan of more than that could not.
Under President Obama’s 2009 Stimulus Package, however, the limit has been extended to $650,000. Thus, a loan between $417,000 and $650,000 would previously have been considered a Jumbo Loan, and no government help would have been available for refinancing. Now, such a loan would not be considered a Jumbo Loan, and it can be refinanced through Fannie Mae and Freddie Mac.

Before this action by President Obama, refinancing a loan of between $417,000 and $650,000 was difficult because of the credit crunch. It is now easier. You can now save one percent per year by refinancing your loan of that amount.
There are a variety of banks and finance companies that will refinance a jumbo loan. Some programs offer no requirement of private mortgage insurance, no lenders’ fees, no points, and interest only new home loans.
Under President Obama’s Stimulus Package, it is no longer necessary to hold a 20% equity share of a home before refinancing a Jumbo Mortgage. Even if a mortgage exceeds 105% of the current value of the home, you are eligible to apply to refinance your Jumbo Mortgage, or the loan that previously would have been considered a Jumbo Mortgage. The interest rate on refinancing such a loan has been reduced from 6.5% to 5.16%.
Banks that will refinance under the government program can be found at any number of popular lending sites, and the official sites of many banks have information.Traditionally, many who did refinance Jumbo Loans obtained interest rates of 7%, which was high enough that many abandoned their plans of refinancing. On the other hand, those with traditional mortgages often paid rates of 5% or below. Traditionally, those who obtained Jumbo Loan refinances have had to accept variable interest rates, rather than fixed.
Fannie Mae and Freddie Mac have traditionally not purchased Jumbo Loans, so it is significant if you want to refinance that the government has changed the definition of what a Jumbo Loan is. You now can get government help for refinancing a loan that would have been considered a Jumbo Loan before, because it is not considered such a loan now. That is true, even if you cannot get help on what the government now considers a Jumbo Loan.

Obama’s Plan for Government Mortgage Help

With the election of our new president comes a promise of solutions to many problems. The Obama administration is working hard to live up to their expectations, which are set extremely high and for good reason. This country is hoping that Mr. Obama will be able to put an end to the economic rut we seem to be in and within his plans for change, that overall goal remains the same in everything he and his administration chooses to do.

Obama’s plan to fight the unbelievable rise in home foreclosures aggressively has been thought about and re-thought about by the administration and now it’s only a matter of choosing a strategy and course of action before setting a plan into motion.
Among these various plans is a plan affecting mortgage rates directly. In this plan, there is a proposed freeze on foreclosures for six months, in which time foreclosures will come to a halt. Meanwhile, the plan is to double the deduction that is happening on interest rates among mortgages nationwide and even a tax cut for those who buy homes rather than renting. That’s only the beginning too, the federal government would also be beginning a federally sponsored refinancing program that hopes to create help when it comes to refinancing your home.

Two years after the beginning of this foreclosure spike the government officials have been debating on which plan could possibly work. In these two years they haven’t been able to choose a plan primarily because they haven’t decided how losses among lenders and borrowers should be fairly divided. The new administration is admit about changing the foreclosure problem in the nation however they still haven’t decided how this should be done in order to benefit both parties and do not want to create an uneven divide.
According to most, the biggest challenge is in fact going to be coming up with a government mortgage help program is going to be finding a plan that can help to refinance without making any irresponsible parties suffer for the losses. It’s important that we realize however that whichever route they choose to go, this plan is not meant to help all “mortgage crisis.” As Laurence Summers explained to many congressional leaders in the form of a letter, fifty to one hundred billion dollars will go to this plan, however they are only targeting foreclosures that are seemingly preventable and help those that have a chance to come out of their rut rather than the “lost causes.”
The biggest challenge of these efforts is how they are going to do it. In that we mean, how is the government going to determine the lost causes from the potential rise outs? That is the ultimate question and it is the question that the Obama administration is still trying to solve before releasing their plan on solving the mortgage crisis across the nation. Among these as we mentioned earlier is the tax credit for those who are buying houses which is supposed to be an incentive for responsible buyers to invest in buying a home.