Regulators look to reduce bad home loans
Earlier this week, Freddie Mac — the second-largest provider of funds for home loans in the United States — announced that it would no longer purchase loans with, “a high likelihood of excessive payment shock and possible foreclosure.”
Today, MarketWatch.com is reporting that the decision could signal a larger move within the industry to crackdown on subprime loans as early as tomorrow.
Here’s a snip:
Companies that specialize in these types of loans [subprime] have suffered as housing prices stopped rising and interest rates climbed from record lows … observers believe regulators will tighten standards for such loans.
So what’s that mean for borrowers who fail to meet the strictest lending standards?
According to Zack Gast, a financial-services analyst at the Center for Financial Research & Analysis, the effect of that would be to make demand for subprime mortgages lower. And, ultimately, fewer people would be able to buy these mortgages.
Regulators are concerned that loosening of underwriting standards last year may have left some homeowners with mortgages they can’t afford, which may not be far off, considering the growing foreclosure numbers across the nation.
Stay tuned for more updates as this situation continues to unfold.
Original post by Foreclosure.com
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