White House Mortgage Reform: How Changes May Impact Consumers

What's Hot

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

How a Mexican Tariff Will Boost the Cost of 6 Common PurchasesFamily

This Free Software Brings Old Laptops Back to LifeMore

How to Protect Yourself From the ‘Can You Hear Me?’ Phone ScamFamily

Report: Walmart to Begin Selling CarsCars

Where to Sell Your Stuff for Top DollarAround The House

Is Your TV Tracking You? Here’s How to Tell — and Prevent ItAround The House

11 Staging Tips to Help You Get Top Dollar When Selling Your HomeAround The House

21 Restaurants Offering Free Food Right NowSaving Money

20 Simple Hacks to Make Your Stuff Last LongerAround The House

4 Car Insurers That Might Raise Rates Even When the Accident Wasn’t Your FaultCars

How to Invest If Trump Kills the ‘Fiduciary Rule’Grow

12 Surprising Ways to Wreck Your Credit ScoreBorrow

9 Secret Ways to Use Toothpaste That Will Make You SmileAround The House

The 2 Types of Music That Most Improve Dog BehaviorFamily

The mortgage market is looking at big changes, and if the White House has its way, they could affect you the next time you apply for a loan.

This post comes from partner site Credit Sesame

The White House and the U.S. Treasury Department recently rolled out a 32-page white paper [PDF] detailing the reforms the Obama administration wants for the U.S. mortgage industry. Basically, Uncle Sam wants to get out of the mortgage lending business, and let private lenders step in to fill the breach.

In a nutshell, the report points to some big-ticket changes for the $10.6 trillion mortgage industry. Among them:

  • Fannie Mae and Freddie Mac will be wound down and ultimately be out of business. The government wants to pare back its role in the mortgage sector and cede more authority (and business) to private lenders. It will remain in the business of getting affordable home loans into the hands of low-income and moderate-income homebuyers.
  • The government also plans to step up its oversight efforts to make sure that American homebuyers – especially low- to moderate-income Americans – are getting a fair deal from their mortgage lender.

Those are two fairly big impacts for consumers. But they’re not the only ones. Here’s a deeper look at how the White House mortgage reform proposal may affect consumers.

1. Consumers increasingly will turn to big banks for mortgage aid

With Fannie and Freddie on the way out, homebuyers will have to look elsewhere for mortgage help. It’s a big shift. Right now, Fannie and Freddie account for around $1.5 trillion worth of U.S. mortgage debt. Taxpayers have also poured $150 billion into both government-sponsored enterprises (GSE’s) since 2008. Now, big banks like Citibank, JPMorgan Chase, and Bank of America will be much more of a focal point for consumers.

2. The cost of mortgages could rise

With less of a government presence in the mortgage market, expect things like fees and closing costs to go up. Also, big private lenders may hike mortgage rates due to lack of competition from the public sector.

3. Expect tighter credit

Private lenders have been ultra-stingy about providing home loans to customers since the start of the Great Recession. That trend should accelerate as bigger banks and mortgage lenders begin calling the shots. If you don’t have a decent credit score, expect to pay more in terms of interest rates to get that home loan.

4. Higher home loan down payments

Federal Housing Administration home loans could change too. Normally, borrowers could expect to put down as little as 3.5 percent on an FHA home loan. But the White House plan would raise that minimum down payment to 10 percent.

5. Loan limits will be changing

The Obama administration wants to reduce the ceiling on home loans. Currently, Fannie and Freddie guarantee mortgages in expensive parts of the country up to $729,750. If approved, that ceiling would drop on Oct. 1 to $625,500. Getting a loan higher than that will be a tough task.

Treasury Secretary Timothy Geithner says the mortgage reform proposal is “a plan for fundamental reform of the housing market” but adds that “we’re going to proceed on this path of reform very carefully.”

Carefully or not, it is a new path for the government – and for consumers looking for a home loan. Expect big changes to come down the road – to a mortgage near you.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 2 Key Credit Card Trends That Will Affect You in 2017

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,789 more deals!