The END of Tightening Mortgage Approval Guidelines

I just read an article this morning about how Freddie Mac has posted a 3 BILLION dollar profit for Q2 of 2012.  This means a couple things:

    1. (objective fact) – That they will NOT require any more “bailout” funds from the federal government to stay solvent.
    2. (subjective prediction) – We will no longer see any more tightening of mortgage guidelines.

So right now, if my prediction is true, this is the tightest that we will ever be as an industry (hopefully).

If you remember my previous post about why mortgage underwriting is so bananas, you would be connecting the fact that these GSA’s (Government Service Agencies Fannie Mae and Freddie Mac) continue to lose billions of dollars every quarter to the higher degree of difficulty in getting a loan approved.

Quick recap from that post: Even though mortgage lenders make money, and mortgage companies make money, and banks make money in fees for delivering loans into that system, the final terminal for all of this debt (the GSA) was the place where all the money was being lost since 2007.

Since each new loan was simply another opportunity for these GSA’s to lose money, the underwriting guidelines and approach became extremely unforgiving.

But now, there is growing evidence that the national housing market bottomed out in late 2011, and tighter underwriting guidelines have evidently improved the health and performance of the GSA’s.

So with this in mind, I can only imagine that at some point we will begin to see some appetite for more loans from these agencies. When this begins, we will see the guidelines loosen, or perhaps the interpretation of the existing guidelines will be softened.

I cannot WAIT!

The LA Times article that inspired this commentary also mentions that Freddie Mac’s financial performance has been better than that of its “sister” Fannie Mae.  From my perspective, Freddie Mac loans have been more difficult to get approved, so I’m sure there is a correlation there. This new Washington Post article reports Fannie Mae’s Q2 profits – 5.1 Billion!

Check back with Portland Home Loan and the Oregon Mortgage Blog for more posts like this one about mortgage process, real estate and your personal finances.

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