It seems to me, this is not the time for big changes. With values down at least 50% and as much as 80%, this is the time to make credit easier. These loans have far less risk, home values cannot fall as they did before.

OK, how much they fell, what percent, does not justify the new value. What does is the rent versus own comparison. I live in Scottsdale, Arizona. In most places, here in metro Phoenix, it is cheaper to buy than to rent. I am talking 20% cheaper. Oh, and I mean actual cash flow cost. I am not including the amortization or your loan. I am not including your tax savings. It is cheaper to own than rent. I believe the market is over sold.

Does that mean prices will jump soon? Not necessarily, we may cruise on the bottom for a while. We may continue on the down side. Or we may see a jump. The entry level homes in west Phoenix bottomed in March of 2009. You could buy a home in Maryvale for $25,000 and it rents for $750+ per month. Those homes are now selling in the $50,000 range. A little bump up, or 100% appreciation in 4 months.

Off on a tangent again! Let me get back to my point. With home values low compared to rents, the down side risk is very low. It would seem reasonable that this is a time to make financing easier to obtain. I am not talking about bank FRAUD, which by the way, the only reason we are in this mess is because of Bank FRAUD! I am talking about keeping Fannie, Freddie and HUD in the game while the “getting is good!” Let’s make it easier for reasonable people to buy homes, move up, be first time home buyers, second homes and investors.

When does the government get out of the mortgage business? Let’s wait for the bounce. It will come. It is just taking its sweet time. Then let’s figure some sort of transition that works for all, while keeping mortgages accessible to all that are deserving.

I just had an investor be declined for a mortgage. He was qualified with a 700 Fico score. It was a short sale, so it took 90 days to approve. In the meantime, he paid off a rental. That is the only change to his credit. His Fico Score dropped to 665, below the required 680 for his program.

Big Changes Coming for Mortgage Market

Late last week the Obama Administration does what it often does when it’s about to announce something controversial: It leaks a little bit to the news media to soften the blow. And so it was with the highly-anticipated, and currently overdue, “white paper” on reforming Fannie Mae and Freddie Mac. The paper is expected by the end of this week.

As we have reported on this blog before, it will likely include several options and scenarios, playing each of them out to conclusion. We already know that the goal is to reduce the government’s role in the mortgage market, which right now is 95 percent of all new originations, according to a report out today from Lender Processing Services. Republicans want that sooner than later, but most say it will take at least five years.

What leaked last week was the idea of reducing Fannie, Freddie and FHA loan limits, currently at $729,750 for high-priced markets to $625,000. I’m not sure that is going to make a whole lot of difference. Remember that the loan limit used to be $417,000, before the housing crash. It was raised because government was the only game in town. Home prices have since fallen dramatically, and depending on what report you choose to believe, are still falling. A far lower loan limit, even while the median home price in California is still , would help to jumpstart private label mortgage securitization again. The jumbo market is already coming back.