Our Administration is currently working on the next problem on their very (very) large plate- fixing the origin of the mortgage lending problem. The government wants to make sure that the mortgage crisis and real estate industry decline will not happen to future generations. There is belief that Fannie and Freddie were large catalysts in the implosion of the mortgage industry and need to be removed either partly or completely from the mix.

There are a few options being rolled around the hill, but it will take years to complete the much needed transformation. Three main options are being discussed and discussed. One would be to go completely private and have Wall Street and financial institutions buy and/or service the mortgages. As always, the mortgages will be sold as securities in the global financial world. Here, the government will insure the securities but not the companies doing the job. Another choice is to have some sort of government guarantee option where the government is involved in regulation and guarantee on a regular basis but can step it up if things get tight. The third choice is almost no government involvement other than the typical FHA, VA and other government backed mortgages. Where the ball drops, nobody knows. However, there will be big changes in the industry, the role of the mortgage lending institution and the financial institutions and government.

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Any which way they go, the consumer will be greatly affected by the changes. So far this year, loan to values have been decreased, rates have gone up and the credit score levels have been raised. There are more forms and disclosures required for the consumer to read and comply. The application process can take more than thirty days to get to the closing and with all of the added requirements, tack on another fifteen days for good measure.

As part of the future mortgage programs, the consumer will surely be required to put down more money and keep a greater level of equity in the home.  A better credit score will be required and perhaps even a new credit scoring system will come into play (they are already working on one).  If private equity firms and Wall Street become the primary handlers of mortgages, there will be increased fees imposed on the consumer and lastly if the government becomes the backer, insurance may be required for every loan at every level. The fact is that regardless of what happens to the industry, the consumer will bear a portion of the new burden. In preparation of mortgage industry changes, the consumer can only make themselves more mortgageable by being a lesser financial risk to potential lenders. Even it takes three to five years to come into play, time flies when you ignoring the problem. Take care of it.