BluefoxToday blog : Fannie Mae update to boost housing demand

That's good news. One of the main barriers to getting the residential real estate market to change direction is the lack of demand. Well, there is some demand, it's true, thanks to very low mortgage interest rates and affordable prices. But they alone won't cut it because the underwriting guidelines remain rather strict and keep many qualified borrowers from getting a home loan. And then there is the poor economy.

But help is on the way. A revised Fannie Mae policy is going to give the demand function a nice shot in the arm. The change involves how many mortgages the agency will buy from one borrower. The limit used to be four, whittled down there when the current downward housing spiral started to gallop full steam.

Fannie Mae is updating the policy for the better to let investors and second home buyers now acquire five to ten financed properties, as long as they meet quite tough eligibility and underwriting requirements. A borrower cannot have any lates, or delinquencies, in the last 12 months on any of his existing mortgages, for instance. No bankruptcy or foreclosure in the last seven years. Also, reserve requirements apply to the subject property and other financed investment homes. There are others, but this clearly shows that the moderation is mostly relevant to experienced and well-heeled investors. The change is scheduled to go into effect March 1, 2009.

Regardless of its limits, the update will give the still-struggling demand side a much-needed kick. That's were the solution to the recovery of the housing market lies. It's another step in the right direction to make mortgage funds more available to qualified borrowers. The investor community is already active here in Las Vegas, and is undoubtedly so across the country, and is essential in helping absorb some of the high housing inventory. Now it has even more reason to do just that.

Besides, this is also psychologically valuable. People will notice that the strict mortgage requirements are beginning to ease up, which leads them to believe that the marketplace is taking its first meaningful measure or two to restore order. And, predictably, more is likely to follow.