Housing Reform Proposed As More Buyers Enter Market

The Federal Savings Bank informs readers of recent legislation to transfer the number home loan financing from the public to the private sector.

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The proposal intends to relinquish some of the role the federal government has played in the housing market over the last few years and bring the majority of mortgage lending back to the private sector.

Chicago, IL (PRWEB) March 18, 2014

Years after the federal government created housing programs to aid Americans who were facing foreclosure or in underwater homes, the U.S. Senate Banking Committee has created a proposal to wind down the role of government-sponsored entities Fannie Mae and Freddie Mac.

Senate Banking Committee Chairman Tim Johnson and Sen. Mike Crapo (R-ID) announced the proposal, relaying that the mortgage financiers would be replaced by government bond insurance if there were private capital losses of at least 10 percent - a measure to protect private lenders, such as the The Federal Savings Bank, a veteran owned bank in Chicago, IL.

"There is near unanimous agreement that our current housing finance system is not sustainable in the long term and reform is necessary," Johnson said, according to The Washington Post on March, 11

The proposal intends to relinquish some of the role the federal government has played in the housing market over the last few years and bring the majority of mortgage lending back to the private sector. The approach will likely lead to a more sustainable housing market that is less dependent on government aid and intervention.

Lending changes

In order to bring mortgages back into the private market and ensure that another housing collapse is prevented, the proposed bill calls for a mandatory 5 percent down payment for home sales. As down payment requirements can often present a challenge to first-time home buyers, they will be reduced to 3.5 percent for these buyers. Under current lending standards, jumbo loans require down payments up to 20 percent, while conforming loan payments can be much lower.

The lower rate for first-time home buyers will likely be a positive influence for these potential homeowners to enter the housing market. The Federal Savings Bank thinks there are millions of Americans who are currently renting yet want to own a home. Improving economic and housing market conditions is encouraging consumers who may have waited to make a new home purchase during the recession to apply and get approved for a home loan today.

Mortgage rate Hurdle

Mortgage rates are often cited by homebuyers for why they can't purchase a property. The average rate for a 30-year fixed-rate mortgage reached 4.37 percent during the week ending March 13. While this is a slight bump from the previous week's average of 4.28 percent, it is nearly a 1 percent increase from a year ago when mortgage rates averaged 3.63 percent. Despite the climb, interest rates are still historically low, meaning most Americans are still able to find a low cost mortgage.

Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.