Friday, March 4, 2011

30 year mortages - a thing of the past soon?

There is much concern about how the industry may change if the federal government shuts down Fannie Mae and Freddie Mac.  The standard 30 year loan that we have become accustomed to as a standard, could in fact become considered a luxury product, according to experts on both side of the political fence.

Rates would almost surely rise for most borrowers, but urban and rural residents with see much sharper rate increase that those of us living in the suburbs.  Lender might charge for some of the features we now are used to; extra fees to "lock in" loan rates a few weeks for a sale.

While this seems to be the goal for both side of the political fence, nothing like this can happen soon, so do not worry. It would take years for Congress to agree on a plan, and the housing market would also have to have a long period of adjustment to recover from the prior dependance on the older financial backing.

The long term effects are both good and bad - abuses in the industry would continue to be reduced by this measure, and it might help to improve the availability of loans to middle class borrowers - supposedly. This will definitely be a hot issue to watch in the year to come - and the mortgage industry is watching to see what will happen - with a very cautious eye.

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