For those of you worried that the scheduled expiration of higher loan limits at Fannie Mae, Freddie Mac and the FHA will have a negative effect on the housing market by raising the cost of home ownership, you can be rest assured the chairman of the Federal Reserve is fine with it.

“As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis,” Ben Bernanke told a Congressional Committee today.

“I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost,” Bernanke said.

There have been numerous and varied contentions about the future state of the mortgage market once loan limits drop from the maximum $729,750 to $625,500. The home builders think it will be catastrophic while some economists and academics say it will have little effect, especially at the FHA.

Bernanke admits that jumbo loans will come, “at a higher cost,” but we have to put in perspective what exactly that higher cost will be. Mortgage rates on conforming loans are already near historic lows, hovering around 4.5 percent on the 30-year fixed. Today’s talk about the potential for QE3 pushed bond yields lower, which in turn keep mortgage rates low.

Page 1 of 2 | Next Page
Show Entire Article

JPMorgan Posts Higher Second-Quarter Profit

Buying US Debt ‘Mind-Boggling’: Marc Faber

Yield on Italy Bonds in Auction Highest Since 2008

Bernanke Fears Will Help Obama in 2012: Analyst

Oil Giant ConocoPhillips to Split in Two, CEO to Retire

More Top Stories

Article source: http://www.cnbc.com/id/43744143?__source=RSS*blog*&par=RSS

When it rains, it pours, but we’re looking at a hail storm in housing finance this week, as government starts the business of taking itself out of the housing business. Tomorrow morning the FDIC will release and vote on proposed risk retention rules for the mortgage market. This includes the “Qualified Residential Mortgage” definition. A QRM would be exempt from risk retention, where the banks have to hold on to 5 percent of the risk when securitizing loans.

The QRM will likely require a 20 percent down payment on the loan, as well as other underwriting criteria, and loans sold to Fannie and Freddie (while still in conservatorship), as well as FHA loans, would be exempt. At the same time, Fannie, Freddie and the FHA are making themselves more expensive, as they try to shrink their currently overwhelming market share.

Barely a few hours after the vote, House Republicans will introduce a slew of, possibly six, bills designed to reform/shrink/eliminate Fannie and Freddie. Then comes more at a hearing on Thursday on housing finance. All of this begging the question: Without Fannie and Freddie, does the 30-year fixed still exist in a fully private market? And what are the dangers if it doesn’t?

Page 1 of 2 | Next Page
Show Entire Article

Fed Is Likely to Raise Rates By End of the Year: Lacker

Economy Adds 216,000 Jobs, Unemployment Falls to 8.8%

Nasdaq, ICE Bid for NYSE, Trump Deutsche Bourse Bid

Bank Risk Breaking Back of Irish Government: Roubini

Why Marc Faber Is Such a Bear

More Top Stories

Article source: http://www.cnbc.com/id/42309859?__source=RSS*blog*&par=RSS