Mortgage loans might become tougher to find and mortgage brokers could start charging more for their services under any of the three proposals offered by the Treasury Department and the Department of Housing and Urban Development.
Investors and lawmakers want the federal government to walk away from the business of guaranteeing private mortgage loans, especially after over $150 billion in taxpayer bailouts. The shift could change the way Americans approach homeownership in coming decades, even as the country enjoys some of the lowest mortgage rates in its history.
A changing mortgage system
Under the current system, private investors back mortgage lenders or buy securitized loan bundles. Government-sponsored organizations Freddie Mac and Fannie Mae take on most of the risk for the majority of new American mortgage loans, mitigating investors' losses when properties fall into foreclosure. The Treasury's new proposals would remove government guarantees, except in the most severe cases.
Proponents of full mortgage industry privatization, including the editorial board of the Wall Street Journal, suggest that private investors might move their capital to more attractive investments. While that shift would lead to an influx of cash in a variety of other industries, mortgage lenders might find themselves forcing prospective borrowers to bring more cash to the closing table. Some industry watchers even suggest that mortgage brokers might start charging service fees to match borrowers with lenders, similar to the way investment brokers charge administrative fees.
Finding Great Mortgage Quotes
This kind of change won't happen quickly. In a series of televised interviews ,Treasury Secretary Timothy Geithner suggested that the privatization of the mortgage loan guarantee system could take five to seven years. The process could take longer still, if lawmakers attempt to time their approval or veto of the Treasury's proposals to coincide with the 2012 election season.
Until the industry gets clear direction from Washington, finding mortgage lenders and mortgage brokers will remain as easy as ever. Use online quote forms to shop rates, while banking as much as you possibly can toward closing costs and down payments. You'll qualify for the lowest mortgage rates possible if you're bringing extra cash to closing, whether you can buy down interest by paying points or by simply reducing the bank's risk with a large amount of initial equity. Mortgage lenders already reward stability, making coming changes less relevant to borrowers willing to use money wisely.