Six federal agencies recently adopted new rules requiring mortgage bankers to keep a certain percentage of risk for every loan they provide. As a result, corporate relocation could be affected for the better.
Citing the Associated Press, RISMedia said the agencies are adopting a new, more relaxed approach to mortgage lending. The new stance is one that eliminates the 20 percent down payment if a lender doesn’t hold at least 5 percent of the mortgage securities tied to those loans on its books – or what most consider a high-quality mortgage. In essence, borrowers may soon be able to carry greater debt relative to their income than before, which is good news for prospective homebuyers.
Talent mobility and refined mortgage lending
The news of the easing mortgage lending practices comes at a particularly interesting time, especially when looked at from a talent mobility perspective. Relocating employees can breathe a sigh of relief when it comes to finding a home in their new location, and renters may be more inclined to purchase.
In fact, The Wall Street Journal reported that Mel Watt, director of the Federal Housing Finance Agency, said both Fannie Mae and Freddie Mac are planning on offering some loans with down payments as small as 3 percent. An agreement was also reached with lenders that outlines what types of mistakes on loans could result in penalties after they’re issued, which could ultimately lower restrictions and ease the loan acquisition process for borrowers with weak credit.
Real estate industry leaders and mortgage bankers have been aggressively lobbying against the 20 percent down payment requirement, noting that it could stifle access to mortgage financing for low- to middle-income borrowers – an integral aspect of the continuing national housing recovery. The new rules come shortly after the real estate market has shown signs of weakening.
Who benefits from the new rules?
That said, it seems as if those on Capital Hill are trying to inject life back into the real estate market. Shortly before the 20 percent down payment regulation was nixed, regulators softened agreements that help protect taxpayers from losses on bad mortgages, The New York Times reported. They also relaxed a regulation that aimed to set safe standards for home loans.
Relocating employees across all industries will likely reap the benefits of the relaxed regulations recently rolled out by federal regulators. Industry experts feel the new rules are long overdue and that qualified, prospective homeowners couldn’t obtain a line of credit to finance a new home purchase. However, the relaxed regulations, albeit calculated and controlled, will likely help the everyday home buyer secure a mortgage.
Future policy changes could be on their way as well, The Wall Street Journal added. The Federal Housing Administration is currently under pressure from mortgage lenders to lower the premiums it charges to lenders because it doesn’t offer loans to low- and middle-income borrowers.