Next September, two months before the Presidential election, America celebrates eight years since the Treasury Department took over Fannie Mae and Freddie Mac and turned them into wholly owned subsidiaries. Since then the federal government’s control over the nation’s housing markets has grown even greater than ever.
While we’ve been waiting for policymakers to fix a broken system of housing, the GSE’s and government programs like FHA are using taxpayer-backed credit to make the housing recovery possible—first to keep virtually all credit flowing in the crisis years, now to open the door to homeownership to more marginal borrowers.
If you’re a first-time buyer or have a less than golden credit past, you’d be crazy to go anywhere else than the government for a mortgage—either a GSE low down payment conforming loan program or a direct federal program like FHA. Not only do you stand a much better chance of qualifying., even the premium payment on FHA mortgage insurance has been lowered to make the decision easier.
The latest Urban Institute credit availability index (HCAI) shows that although both private and public mortgage credit availability remains above the record low of 4.6 in the third quarter of 2013 (Q3 2013), it has trended downward over the past four quarters. The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.
However, mortgage credit availability in the government-sponsored enterprises (GSE) channel—Fannie Mae and Freddie Mac—has been at the highest level over the past three quarters since the low hit in 2010. Credit availability in the government channel (FVR), which comprises the Federal Housing Administration, the Department of Veterans Affairs, and the Department of Agriculture Rural Develop.