Fannie Freddie Want Higher Ratios. Good or bad?
Of course the Feds will increase ratios. 1) as they increase interest rates they need something to encourage buyers to still buy to keep the economy going 2) as the buyer pool dwindles – you need to create more buyers – expand the ratios and get the consumers previously ineligible to eligible status – you’re creating a new “subprime” buyer 3) student loan debt is crippling – or is it really? We said you could buy a house (remember the waiver is gone I believe) so how is student loan debt crippling? 4) instead of getting people’s income up with better employment or debt down – which is the hard work – we will just adjust the debt ratio to make your life seem better. Thank you for today’s post – it tells me the Feds are grasping at straws at what to do to actually address Housing stability and affordability
More concerning…consumer debt has reached an all time high and is far exceeeding pre- last crash levels. Not only is a crash going to happen, it’s going to be huge. Rising interest rates may slow home sales, but rising interest rates on credit cards could be a death sentence to some consumers because they’ll have no spending ability, home values have gone up so they’ll take equity from their homes, homes will have no value, people will not stop spending and BANG!. Crash is coming and it’s going to be a good one.
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Y’all mention QM ratios at 43 with the ‘scare’ that lenders will get hit with buybacks if a market correction occurs and foreclosures spike. Any loan purchased by a GSE or FHA/VA is considered a ‘temporary qualified mortgage’ (with no ‘temporary’ date limit set that I know of) and ratios are not restricted to 43, so brokers and/or correspondent lenders should not fear buybacks of these loans. Of course, I agree with the rest of it (GSE’s out of control again).
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