About five years after the recession began, the real estate market is on the road to recovery, but new rules imposed by the Federal Housing Finance Agency could potentially derail any improvements, according to Reuters.
The FHFA recently announced that loans sold to Fannie Mae or Freddie Mac in January and beyond cannot be forced back onto banks if the borrower makes payments of 36 consecutive months. According to the source, this means the two government-sponsored enterprises will need to check loans much earlier in the process for issues in order to avoid any potential problems in the future.
Joseph Mason, a professor at Louisiana State University's business school, told the news source that the FHFA is making these rules assuming that the country will never have another mortgage crisis. If another crisis does in fact happen, he said Fannie and Freddie could lose even more money than they did during the first housing collapse.
A former executive at one of the GSEs told the news source that the new FHFA rules make it much easier for banks to give bad loans to the government.
