Effects of government’s mortgage overhaul to start early

The winding down of Fannie Mae and Freddie Mac will make a big impact in the next few months.While lawmakers in Washington are working to wind down Fannie Mae and Freddie Mac over the next five or seven years, real estate experts say the impact from those decisions will be felt well before those changes become final.

Mortgage experts told the New York Times (http://www NULL.nytimes NULL.com/2011/03/06/realestate/mortgages/06Mortgage-fannie-freddie NULL.html) that those looking to buy a home could see higher mortgage costs even within the next year. That's because while some parts of the plan require approval from Congress, others don't, and could be in place quickly.

"There's a lot of uncertainty in the process," Barry Zigas, the director of housing policy at the Consumer Federation of America, told the paper. "but you're probably going to get a better deal on a fixed-rate loan sooner rather than later."

Other analysts said that in the coming months, banks may try to promote adjustable-rate loans instead of fixed-rate mortgages, because they generally bring in more money.

However, that would not be the preferred choice of most people looking at Houston homes. A survey last year by Fannie Mae found that borrowers with fixed-rate loans were more satisfied than those with other mortgage types.

Mortgage rates fall sharply

Mortgage rates have fallen again.After rising to start the year, mortgage rates have declined once again, giving those looking at Houston homes more flexibility when looking to buy properties.

According to Freddie Mac (http://www NULL.freddiemac NULL.com/pmms/release NULL.html?week=9&year=2011), the average rate for a 30-year fixed-rate loan last week was 4.87 percent which is down from 4.95 percent the previous week. Rates for 15-year FRMs also fell, dropping from 4.22 percent to 4.15 percent.

"Mortgage rates saw an overall improvement this week. Interest rates for 30-year fixed mortgages were almost 0.2 percentage points below this year's high set just three weeks ago," said Freddie Mac chief economist Frank Nothaft. "This means that homebuyers could now expect to pay $263 less per year on a $200,000 loan."

However, Nothaft also expressed concern with demand in the housing market, with low levels of new home sales and two consecutive drops in the National Association of Realtors' Pending Home Sales Index.

The pending sales index dropped 2.8 percent in February to a reading to 88.9, which is 1.5 percent below the 90.3 mark of a year ago. However, it is still higher than most readings from late last year, when the market was recovering from the absence of the homebuyer tax credit.


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