Why are home loans harder today?
People believe that banks give you a mortgage and put that mortgage in there vault, that just isn’t true. Most of the time let’s just say Bank of Somewhere gives you a mortgage and then they sell it to Freddie mac or Fannie Mae and Bank of Somewhere just becomes your servicer which collects payments and pays taxes and insurance.
Now you see Fannie reporting something like a 18 Billion loss last quarter so what that means is people are not paying back their mortgage and Fannie loses money on a bad bundle of loans. So, Fannie does some research and finds the bad bundle of loans are made up of loans that were done with below 620 credit scores and Fannie says ok no more loans will be done with 620 fico scores and all the banks have to follow suit because they have no one to sell the loan to.
If banks can’t sell the loan to someone they will not do it.
Fannie bundles these loans and sells them on the open market and if nobody wants to buy them well then Fannie doesn’t want to do them either and the snowball starts. No buyers=no mortgages and that is a big reason why the Jumbo market is so slow right now, very few buyers of those loans.
Until Fannie and Freddie ease up on the credit standards for a mortgage look for more of the same to clean up the mortgage market so people will start buying again.
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