Director of the Federal Housing Finance Agency Mel Watt, has instructed his company and Freddie Mac to buy loans with down payments as low as three percent.
During the Mortgage Bankers Association's annual convention in San Diego on Monday, Donald Layton, CEO of Freddie Mac, told those who were in attendance that the surprise announcement of Watt last year was a net positive, and that more low down payment products could be on their way in the next year or so.
According to the report from the Market Watch, RealtyTrac, an Irvine, California-based real-estate research firm, said that the current mortgages with less than three percent down payments comprise about eleven percent of the overall mortgage market. Most of the low down payment loans were dissolved after the mortgage crash because they were seen as risk.
Layton shared that the current federal lending rules make it difficult for self-employed borrowers to qualify for a home loan. Qualified individuals who don't have a steady source of income also face difficulties in applying for a house loan due to the reluctance of most of the big bank lenders who sell their loans to the government's big mortgage buyers.
Market Watch reported that the plan to offer a higher number of low down payment loans can result to a repeat of last year, when congressional critics of the Federal Housing Finance Agency and Freddie Mac said that a higher number of low down payment loans can result to the return of the mortgage market to pre-crash conditions, when borrowers with little of their own money invested in a home, simply walked away.
Freddie Mac is currently under the conservatorship of Federal Housing Finance Agency and will remain as such for the foreseeable future. Layton said that Freddie Mac is still several years away from a reform measure that could bring the two big mortgage backers out from under the FHFA's control.
