Mortgage Rate News

In March, the two government chartered lenders, Fannie Mae and Freddie Mac, struck a deal with Andrew Cuomo, the New York state attorney general. In the agreement, Fannie Mae and Freddie Mac agreed only to buy home mortgage loans from lenders that met certain standards of appraiser independence.

Now, though, that deal is under fire and has been called into question. The Daily Briefing, from Fortune, reports on the complaints against the agreement:

But John Dugan, the comptroller of the currency, wrote Tuesday in a letter to the companies’ regulator that the new guidelines “violate or conflict with federal law in fundamental respects.” Dugan said the parties involved in the Fannie-Freddie deal - their regulator, the Office of Federal Housing Enterprise Oversight, and the office of New York’s attorney general - have no authority to dictate the internal structures of federally regulated banks. Moreover, Dugan says, the new rules would impose new costs on borrowers while providing no benefits.

At issue is the fact that many mortgage lenders have in-house appraisers, or partner appraisers. There have been lawsuits in the past, and worries continue, that appraisers offer home values that result in more money for the banks that they are affilitated with. The agreement with Fannie Mae and Freddie Mac back in March was designed to put pressure on mortgage lenders to reform their appraisal practices. Since Fannie Mae and Freddie Mac are the largest buyers of home mortgage loans, without their being able to buy certain types of loans, mortgage lenders would be forced to re-evaluate their practices.

Now, though, things may change. There is legislation to amend the housing relief bill in Congress to nullify the agreement made by Fannie Mae and Freddie Mac. This would allow the two government chartered lenders to continue buying home mortgage loans (and refinancing them), regardless of the practices of the banks.

Do you think that Fannie Mae and Freddie Mac should only buy home mortgage loans that meet certain standards?

Tags: mortgage loan blog, mortgage lenders, home mortgage loans, Fannie Mae,Freddie Mac, appraisals, Andrew Cuomo

Back in 2003, a rule was put into place. This rule stated that foreclosures could not be resold without a 90 day waiting period if the buyer was going to use government backed loans for purchase. The whole point was to reduce the number of property flipping schemes that charged buyers too much for foreclosures.

All that is about to change. For a year, at least.

The Bush Administration has approved a suspension of that rule in order to facilitate the faster sale of foreclosures and other properties that are in distress This is mainly because foreclosures continue to rise, adding to the number of homes on the market — many of which won’t be sold. CNN Money reports on the reasoning behind the suspension of the house flipping rule:

“A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” FHA commissioner Brian Montgomery said in a prepared statement.

This is a significant gain for house flipping experts, who have found it difficult to operate in the current market. With home values dropping, house flipping has been hard. And with foreclosures increasing, no doubt experienced flippers have been lamenting the fact that the five year old rule prevents them from profiting from the glut in home supply.

Now that has been remedied. For one year, house flipping can once again be the subject of real estate investment seminars and “pay a small fee to learn how to make a bundle in the real estate market” get rich quick schemes. And true house flipping professionals can make tidy profits as they are allowed to go after buyers who get FHA loans and use other government back home mortgage loan programs.

But it also means that it is time for “buyer beware.” With the rule suspension, house flipping of foreclosures will increase — and so will the scams and the overcharging.

Tags: foreclosures, real estate investment, home mortgage loan, home mortgage blog,
house flipping, FHA loans, Bush Administration

Apparently, there are still some folks out there offering seminars on how to get rich by flipping homes. Here is a reader question:

I am thinking of investing in real estate. A buddy of mine is telling me that I should get into house flipping, and he can help me get started if I attend a seminar. Is this a good way to get into real estate?

While it is true that now can be a good time to buy a home, it is not the best time to buy for flipping purposes. Home values are still struggling, and if you buy a home now to turnaround and sell again, you are not likely to make any money.

Right now, when you buy a home and get into a home mortgage loan, it is more of a long term deal. The home will likely increase in value, but it will probably take seven to ten years to get any real appreciation out of it.

Buy a home for investment purposes

If you have the credit and the down payment for it, you could get into real estate investing by buying an investment property. This is something that will offer you a regular monthly return (this isn’t house flipping). If you can buy a home that you can rent out to cover the home mortgage loan payments, that might be a good idea. There are some good deals on foreclosures right now, and that could be one way to create another income stream.

But beware of house flipping. With the real estate market as it is now, you are not likely to make a quick profit. Now is the time to think of investing in real estate as a long term investment.

Tags: house flipping, real estate, home mortgage loan, mortgage loan blog,
investing real estate, buy a home, real estate market