GSE Raise Down Payment 1

Not surprisingly, Fannie Mae and Freddie Mac are making big moves and getting everything wrong. Their latest big announcement may be the funniest one yet but it’s unfortunately a sad fact.

They basically decided that as of the beginning of this month, borrowers must put up 5% of the homes’ value as down payment instead of the typical 3%. This may not sound like a huge change but it really is and really isn’t, depending on how you look at things.

First of all, it’s a huge deal when you’re a struggling middle-income family trying to buy your first home. But from an industry perspective there are other options out there for the 3% down payment, like the FHA and USDA.

Also, is this move really going to minimize risk in the industry? Sure the banks have been too casual giving out loans but I think those days are behind us, at least for now. And is the extra 2% enough to make a difference anyway?

What’s your take on this? Do you think the GSEs have gone off the deep end or is there more sense to this than meets the eye?

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