Fannie Mae reported today a loss of $2.3 billion for the 2nd quarter. Earlier this week, Freddie Mac announced that it lost $821 million in the same period. As a result, both have said they will be making changes that will make mortgage loans harder and more expensive to get.
In effort to shore up their books, Fannie and Freddie will impose higher fees on lenders who sell loans to them. In turn, these lenders will pass their increased costs through to borrowers, which will result in higher interest rates for home loans.
In addition, Fannie will stop buying Alt-A loans by the end of the year. Alt-A loans are often used by borrowers who can't document their incomes, such as self-employed individuals. In the recent past, these people were able to obtain loans based primarily on their credit scores, often with little or no money down. In the wake of the housing market bust and the credit crisis, this option has been pretty much taken off the table.
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