Private Lenders Showing Stronger Presence In Mortgage Market

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The Federal Savings Bank informs readers about the recent market shift from public to private lending.

VA and FHA home loans at The Federal Savings Bank

The Federal Savings Bank

Although loan backed by Fannie and Freddie are often popular with first-time home buyers, they have actually become more costly in recent years.

After years of dominance by government-sponsored enterprises, private lenders, such as The Federal Savings Bank are starting to have a strong showing in the mortgage industry.

For some time, the Obama administration has expressed its intentions to slowly phase out government involvement in the housing market, starting with the gradual winding down of both Fannie Mae and Freddie Mac. Some economists feared that such a shift could result in problems for home buyers. As private lenders shied away from borrowers that could be deemed risky, it would have been harder for many Americans to make a new home purchase.

Even though the gradual exit of the two GSEs has yet to pass, Capital Economics released an analysis showing that private lenders are already beginning to shoulder more of the mortgage market. The research company noted a declining spread between conforming and jumbo loans, which indicates private capital is returning to the market, as reported by HousingWire on April 11th. Capital Economics believes the change is good for the housing market.

Home buyers figure to benefit from private capital

Although loans backed by Fannie and Freddie are often popular with first-time home buyers, they have actually become more costly in recent years, due to increases for the guarantee fees charged to lenders. The Federal Savings Bank notes that Jumbo loans, however, do not have guarantee fees, making them more attractive and helping close the spread.

This information is consistent with a recent Mortgage Bankers Association report, which found that more jumbo loan programs have aided in expanding mortgage credit availability. Capital Economics Property Economist Paul Diggle corroborated the MBA findings, noting that his company's data suggested that such loans are becoming more available.

Other factors raising costs for home buyers

In the past, home loans provided by the government were some of the best low cost mortgage options available. However, various economic factors have increased fees and interest rates. Tapering of the U.S. Federal Reserve's monthly bond-buying program, for instance, caused a rise in conforming loan rates.

Additionally, loans provided by the Federal Housing Administration - another popular option among first-time home buyers - have seen increased fees. Considering contacting The Federal Savings Bank, a private, veteran owned lender which can help finance a future home purchase

Contact the Federal Savings Bank at: 855-686-3883

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Giorgio Urbano Ferrero
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