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In a move to help new homeowners succeed in finalising their homes, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) has paved way for the new rules. As per the new rules, the mortgage company will factor in the joint income of all residents in a home rather than the income of one, who is applying.

What the new rule says?

Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) introduced the new rule under its Home Ready program. While home owners have welcomed this new policy, the same has become a point of debate among industry experts. By employing such rule, the mortgage company will make the home loan affordable to even those, who actually do not have the capability to repay their home loans for the first few years. Thus, increasing the risk of home-loan defaults, a situation witnessed during the financial crisis of 2008-09.

However, Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) is confident of the new rules as it said that it will help extended and multigenerational households to take a home loan. The new rules imply that the income of an earning adult son or a mother-in-law residing in the same house can be taken to determine the loan eligibility of the primary home loan seeker.

The concern

In addition, the mortgage company has also introduced several new rules to help homebuyers understand their financial obligations. For instance, Fannie Mae will provide the homebuyers will disclosure documents in advance, ideally, three days before the closing. By employing this rule, the mortgage lender wants to ensure that the homebuyers are fully aware of the terms and conditions of their mortgage.

These rules have come into effect from October’ 3 already. While such rules are framed to benefit both home buyers and nation, but industry critics are wary that determining loan on the basis of income of all residents is nowhere close to a wise policy. Some even argue that such policies can again push the mortgage industry on the verge of 2008 like bubble, the signs of which has not yet completely faded.

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Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) extended the short term downward correction for the second consecutive session as it ended the last trading day of the week with a loss of 3.85%. The volume of 3.5 million for the day against the much higher daily average of 4.3 million reflected the corrective nature of the price action. The decline has now reached the immediate support area around $2.45, which must push the price back higher or else, the bulls run the risk of seeing a much deeper decline towards $2.35 or even $2.10 levels. For a long term reversal, the resistance around $2.75 must be overcome first.

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