Feds to help finance mortgages
he Obama administration on Monday unveiled a new program to help state and local housing finance agencies make more home loans, but some Lee County experts say the program should proceed with caution. The plan will help the agencies finance mortgages for first-time homebuyers and develop rental housing.
The agencies have had a hard time raising money because of the housing crisis and credit crunch. This year, the agencies have sold about $4 billion in tax-exempt bonds — one-fourth the amount in a typical year. That reduction is limiting the number of loans they can make.
Making credit more available is a good idea as long as it doesn’t lead to reckless lending, said Suzanne Sherer of Remax Realty Team in Cape Coral, who’s also president of the Realtor Association of Greater Fort Myers and the Beach.
“We don’t want to go back to the days of 2005 (at the height of the housing frenzy) but I think the pendulum has definitely swung to the opposite where it’s almost impossible for people to get financing,” she said. “It has become cumbersome to get financing.”
It’s also important to avoid the loose lending practices that led to a speculative bubble that burst and caused home prices to fall over the past four years, she said. “We don’t want it to be back to if you can fog up a mirror you can get financing.”
Also urging caution was Eddie Felton, executive director of the private, nonprofit, Fort Myers-based Home Ownership Resource Center, which helps people who are behind on payments.
The underlying problem is a shaky economy in which people often become unemployed and are likely to lose their homes, he said.
“If you lose your job, you’re going into foreclosure again,” Felton said. “I think that giving money to lending institutions isn’t going to help the situation if people can’t maintain a job. People are being set up for failure again.”
Bonnie Timberlake, executive director of the Cape Coral Housing Development Corp., said she is eager to find out more about the program because so many people have been seeking help from the agency.
“Everybody has been affected by this economy,” Timberlake said. “The greatest demand is coming from families between what we would consider low and moderate income. Of course, a lot of people could have had a moderate income or above-moderate income until they lost their jobs.”
Federal housing guidelines define moderate income as up to $37,200 for a family of four.
Timberlake said any efforts to make credit more available will be welcome.
“I’m guessing in the next year or so, we are going to see people who have lost their home and they are trying to get back into a home and banks are going to have to be a little flexible,” she said.
The new program uses mortgage finance companies Fannie Mae and Freddie Mac to help fix the financing crunch. The two companies will package mortgages made by the housing agencies and sell them as bonds to the Treasury Department.
“It’s an additional layer of assistance to borrowers who are seeking a mortgage at a time when credit is scarce,” said Howard Glaser, a mortgage industry consultant in Washington. “It doesn’t solve all the problems of the housing market, but every little bit helps.”
Officials declined to place a dollar value on the size of the bond program, saying it will be based on demand.
Fannie and Freddie also will help to provide short-term financing for the housing finance agencies, with backing from the Treasury. State and local housing finance agencies have pressed for federal help for months.
Treasury Department officials said any losses from loan defaults will be entirely covered by fees paid by the state agencies.
“The expected cost to the federal government is zero,” said Michael Barr, an assistant Treasury secretary.
The agencies play a relatively small role in the mortgage market, aiding about 100,000 to 200,000 first-time borrowers a year.
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