A quiet event that will have a BIG impact on real estate
Here is a quiet little tidbit of information that happened over the holidays that will have a huge impact on real estate for the next couple of years. The Treasury Department will now give unlimited funds to Freddie Mac and Fannie Mae over the next three years. Previously their commitment was only 200 billion each but the Obama Administration made the change over the holidays.
What does this mean for real estate?
These two companies fund at least 50% of all home sales in the United States. This will keep the money flowing for sellers to sell their homes and buyers to have funding for purchases. By being backed by the Treasury this should keep interest rates lower because Freddie and Fannie can get better lending rates.
Here is the biggie-both companies will offer loan principal forgiveness to delinquent and underwater home owners. This will help many people in foreclosures and prevent the “walkaway” syndrome where some owners are turning in their keys leaving the home for Freddie and Fannie to take losses.
Hopefully this new policy will have a greater impact than the Home Affordable Modification Program which has had minimal effect up to this point.