Home Mortgage Foreclosures, Subprime Lending & Freddie Mac
Freddie Mac and Fannie Mae, the mortgage finance giants which together own or secure over half of the mortgages in the US, are in poor condition, and will further deteriorate without a tax-payer bankrolled deliverance planned by Congress. For the second quarter of 2008, Freddie Mac continued to hemorrhage, losing over $821 million. Freddie Mac and Fannie Mae are in the market of selling and guaranteeing mortgage loans to investors and together have also lost billions, being forced to make good on foreclosures to those investors.
How it Happened
Adjustable rate mortgages are intended to help struggling first time home buyers get over the initial expense of buying a home by starting off with a lower rate and increasing it as time goes by. To make the home mortgage climate even more prone to problems, lenders during the housing boom were offering loans to people who were borderline risks right from the start.
When the economy began to falter, people lost their jobs, and defaulted on their mortgage payments. Experts are now keeping a close eye on the mortgage payment delinquency rate, a value defined by the number of loans which are behind in payment by 30 days or more, which is currently at 15.75% as a prognostic indicator of further troubles.
Recently Morgan Stanley, the second largest loan bank, reported that it was discontinuing home equity lines of credit due to plummeting property values. Despite this, the US Treasury Dept. recently hired Morgan Stanley to make recommendations on how to help keep Freddie Mac and Fannie Mae viable.
What Homeowners Facing Foreclosure Need to Do
Over 70% of the homeowners facing foreclosure do not seek assistance. Don’t go down without a fight. You can obtain advice and assistance from various government agencies, such as the Housing and Urban Development Department (HUD) and non-profit agencies. Lenders do not want to foreclose on your property and may offer you alternative payment plans to keep you in your home.
Is This a Good Time to Buy a Home?
As the value of property declines, many investors and private citizens believe that this is the best time to buy. Solid advice from the experts is to consider buying if your monetary resources are robust; your source of income is stable; you can afford the down payment and a fixed rate mortgage; you are planning to live in the home for at least seven years. Although lenders are now more careful to whom they offer home financing, the new home buyer needs to be especially cautious. You may want to wait until the report from Morgan Stanley affirms the viability of Freddie Mac, Fannie Mae, and the entire mortgage loan industry.