Uncle Sam to the rescue? The government is here to help us? Frankly, both of those statements cause me pause. But I think the move by our federal government to take over the operations of these two companies was the correct option, given that the government has been watching Rome burn for the past couple of years. The feds allowed both companies ample opportunity to fix their own problems. There is no doubt lending standards have been too lax for markets that are not appreciating at 20% annually. Both Fannie and Freddie failed to adjust when those coastal and desert regions could not sustain that level of appreciation. With Uncle Sam to the rescue, I think we will see a continued tightening of eligibility standards for borrowers…but the pendulum had swung too far, SO THIS IS A GOOD THING.
More restrictive standards for borrowers (anticipated as a result of the government takeover) means mortgage holders and investors will be more secure when they invest in mortgages for the housing market. A more secure investment means that investors will not demand as high of a return. THAT IS WHY INTEREST RATES DROPPED THE WEEK following the takeover.
Topeka area real estate values remain stable as they have been for the past decade. The issues creating problems for the mortgage industry were not issues created in Topeka; we just get lumped in with the rest of the national sound bites. What will be most helpful for our market resulting from this takeover is that the investment community is more confident in the mortgage industry this week than they have been since May of last year. Buyers with good credit and a modest down payment can still get a GREAT loan and a fair price for home in our area.
What about the future? I have no crystal ball here. If the housing markets in the California, Arizona, Nevada, Florida markets begin to stabilize, Matt Lauer’s sound bites will get better. The confidence in the security of a home mortgage will strengthen and interest rates will continue at these great levels for qualified buyers. If investors believe we are not reaching the bottom of the market, rates will probably start inching upward along with down payment requirements. I have run out of lipstick…
Bryon R. Schlosser, CEO
Griffith & Blair American Home Services
