Introducing The Federal Housing Finance Agency
FHA loans are one of the most talked about today…that was until Freddie Mac and Fannie Mae started getting all of the attention. Recent share prices as evidence, the two mortgage giants are struggling and in desperate need not only of additional capital, but also more management. Freddie Mac and Fannie Mae are the nation’s top lenders, who are government-backed providers of funds for backing mortgages. Without them, the nation’s mortgage industry would wobble even worse.
The problem with these providers is that they have not had much guidance or any amount of regulation. There is new legislation working its way through Congress that will provide some relief. James B. Lockhart III has been heading this agency for some time, and throughout that, time has been calling for help. The problem, as he has said is that the two agencies are not required to hold a lot of capital, as compared to larger banks. That’s about to change…or it may that is.
The legislation provides several changes to the Federal Housing Finance Agency, which will now regulate Freddie Mac, Fannie Mae and the Federal Home Loan Banks. First, a regulator will be put in place that has the ability to raise the capital requirements. The regulator also has the ability to hold back executive pay at these companies. If the companies should become insolvent, the housing bill offers specific procedures to place the companies into receivership status. Also important is the drop in the highest level of mortgage backing that Fannie Mae and Freddie Mac can loan or guarantee to $625, 500, which is down from $729,750, which is the temporary ceiling that was put in place.
In addition to this, the legislation also offers a provision for a portion of the profits to be put into a trust fund, which is then designed to provide financing for those who qualify as low income people.
What does this mean to you, the average homeowner? Currently, it doesn’t mean a whole lot, not until it goes through Congress and gets put on the books. It should mean that more regulations would be in place to prevent the collapse of these important lending bodies in the nation.
However, for now, it is up to you to find the best loan for you, which Freddie Mac and Fannie Mae may be. FHA loans are an opportunity to get into a home loan without a lot of risk, too.