Freddie Mac to Purchase Loans with Down Payment as Low as 3%

by San Antonio Attorney

Mel Watt, Director of the Federal Housing Finance Agency, instructed his company and Freddie Mac to buy loans with down payments for as low as three percent.

Watt’s surprise announcement was made last year and it yielded a net positive, now that cheaper down payment products can be in full stock on the market.  This was also mentioned during the Mortgage Bankers Association’s annual convention by Donald Layton, CEO of Freddie Mac last Monday.

With current mortgages with less than three percent down payments, these consist at approximately eleven percent of the overall mortgage market.  Majority of the low down payment loans were erased after the mortgage crash because this was foreseen as a risk, according to RealtyTrac, real-estate research firm, based in California.

The current federal lending rules become tedious and difficult for self-employed borrowers to qualify for a home loan.  Some qualified individuals who don’t have a consistent income also face challenges in applying for a house loan due to the reluctance of the fact that bank lenders also sell their loans to the government.

The plan to offer a wider choice of low down payment loans can result to a repeat of occurrences last 2014.  A vast number of low down payment loans can yield result to the return of the mortgage market to the condition prior to crash.  Last year, when borrowers with little of their own money invested in a home just walked away, according to Market Watch.

Freddie Mac, under the conservatorship of Federal Housing Finance Agency, will maintain its stand for the foreseeable future.  But Freddie Mac is still a few years away from a proposed resolution that can bring the two giant mortgage backers free from the FHFA’s control.

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