A new law shows that the government is doing everything it can to make it easier for high-risk borrowers to get mortgage loans. Since the Federal Reserve Board recently took steps to lower federal interest rates, the United States House of Representatives wants to help subprime lenders, who are thought to be the ones who caused the turmoil in the real estate market in the first place.
The bill, called the Expanding American Homeownership Act, should soon go through the House. It aims to make it easier for people to get mortgage loans by giving the Federal Housing Authority more power to take on more high-risk borrowers. Most of the time, these risky ideas are too dangerous for banks to consider. However, the Federal government wants to help these people by giving them their own insurance policy.
The main goal of the new bill is to give the FHA, which is the biggest mortgage loan insurer in the world, the power to help people who might hurt the regular market if they got loans from regular lenders. The government thought that these were the kinds of people who would be hurt by mortgage rates that were too high and end up in a big financial hole with banks.
Representative Maxine Waters of California was the first person to bring up the bill. Mrs. Waters said things that showed she wanted to help people who had been forced into bad mortgage loans in the past. She also said that the new bill would help young people who were buying their first homes in a market full of tired lenders in a lot of ways. There are rumours that the House will pass the bill because many of the more powerful representatives are in favour of it.
The main goal of the bill is to give the FHA more ways to do things. Their goal was to insure high-risk mortgages before, but now they want to take it to the next level. With this bill, the FHA would be able to charge higher interest rates on loans that are riskier. This would help the government protect itself and protect people with bad credit from being taken advantage of. Also, the bill would let the FHA insure loans with no money down and loans with low down payments, which are good for young buyers. An important part of this law is that it helps people who are buying their first home.
The bill also tries to make up for the fact that mortgage loan insurance premiums are getting more expensive. These have been going up steadily, and the bill would stop them from going up further unless there was a major reason for them to go up, like to pay for insurance claims.
Some parts of the country would probably benefit more from the bill than others. Because of how much property costs in places like California, Massachusetts, and New York, loans there tend to be bigger and cost more. Since the FHA has been limited in how much it can spend to insure a loan for a long time, it can't compete in these markets. Now, it will be able to take part in that market, where home prices seem to be going up all the time.
There's something else in the bill that should help the real estate market as a whole in the long run. It would give the U.S. Department of Housing and Urban Development the power to make home buyers go to counselling before giving them a loan with a low down payment. This change would help make home owners much smarter and less likely to lose their homes to foreclosure. The long-term effects of such a move could help pull the real estate market out of its current slump.
So far, those who give out mortgage loans have had good things to say about the law. At this early stage, the powerful Mortgage Bankers Association has given its support to the bill. There are, however, parts of the bill that the MBA does not like. The MBA says that a part of the bill that talks about a long-term housing trust has the potential to slow down the process.
Congress has made a promise to protect consumers from unfair treatment of any kind. Many of the most powerful lawmakers in the House say that financial regulators and companies that give out mortgage loans need to do more in this area.
A bill that would let the FTC change rules about how accurate consumer credit information needs to be is one way to do this. So, people wouldn't have to worry about mistakes or false information on their credit report. Congress knows that because credit is so important now, borrowers need to be protected as much as possible in this area if they want to get mortgage loans.
Overall, these changes should have some effect on the real estate market as it is now. By helping people get on the right path to success, the system as a whole can do well.
