Friday, March 8, 2013

Real Estate Brokers who Claim Federal Loan Programs as Unsuccessful should NOT be working in Real Estate!

First off: I do NOT work in the Residential side of Real Estate.

Second: RE Brokers who do NOT understand the benefits of said Federal Loan Programs should NOT be in Real Estate!

There, I said it.

Lately, I have been annoyed by local Brokers/Agents who claim the 2008 economic collapse was from the unsuccessful Federal Loan Programs such as: Fannie Mae, Freddie Mac, FHA and VA Loans.

I am amazed at how uninformed said RE Brokers/Agents are of these programs that have and still do benefit their industry successfully over the years.

Fannie Mae was established in 1938 because there was no national standard for banks to lend. Each bank had their own loan guidelines; and they portfolio-ed ALL their loans from initial payment to the last. FDR realized that there was a need to free up this financial restriction on the banks so that they would have more money to make more loans to more borrowers, thus enabling the banks to make more money for their depositors and the bank itself.

So, IF the bank wrote a loan up to the Fannie Mas guidelines and once funded, the bank could then sell the loan to Fannie Mae. This would pay the bank off for the loan at a profit and the bank could make more loans.

AND, Fannie Mae would earn the interest from the loan by holding it over time so that allowed Fannie Mae to be (one of) the most profitable agencies of the Federal Government through the years. And, because banks were re-leaved of the portfolio part, IF the borrower did defaulted, it was then Fannie Mae's responsibility to foreclose. This aspect helped the Banks PR-wise because during the depression, it was the banks that were the bad guys! If a borrower defaulted, the local bank had the unfortunate duty to take property away from those borrowers - who were most likely depositors, too.

So, once the loan was Fannie Mae's responsibility, the bank was off the hook.

Freddie Mac, which was started in 1968, works with mortgage lenders to help people get lower housing costs and better access to home financing. Hmm! This sounds as if this benefits the bank or financial institution that funds the loan, and it helps the residential real estate industry, too, doesn't it? So, if there is a default, the Federal Government takes the risk. (Pst! Through the years, during 'normal' real estate times, Freddie Mac also made the Federal Government a profit! But, Pst! Don't tell anyone this. Especially a real estate agent broker! It's a secret.)

As for FHA, this loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments that are part of their portfolio. It also provided easier guidelines so that the bank or financial institution could make money funding the loan and IF there was a default, HUD guaranteed the loan for the lender. (Pst! This program also made the Federal Government and the lenders a profit! And, it helped RE agents/brokers make more money because the borrower could save money by putting a smaller amount of money down. But, please don't tell anyone this. It's a secret, too!)

Lastly, VA Loans are just as they sound. When WWII soldiers came home, there was a great appetite from these veteran soldiers to start a family and buy real estate. Since they had spent the previous years fighting tyranny in Europe, the Federal Government passed this loan program as part of the VA Benefits that allowed veterans to buy houses at "0" Down and their closing costs were limited. Hmm? This loan program was so successful, it was the primary reason for the successful boom that continued well into the late 1970's.

And, as you can see, these Federal Loan Programs essentially helped create the real estate industry.

So, IF you hear a RE Broker or Agent complaining about Federal Loan programs as unsuccessful; OR, that these loan programs caused the economic collapse in 2008, my suggestion to you is: find another, more informed broker or agent to help you buy or sell your real estate property. I strongly suggest this because a broker or agent who doesn't understand these programs that have not only benefited home buyers and sellers, but have helped brokers and agents alike make money through the years, they really and truly should NOT be working in real estate.

Well, that's my two cents! I am glad to help you understand loan programs that help all in the real estate industry. Now, let's put the blame for the 2008 economic collapse where it belongs: Wall Street!

For more Information about any Las Vegas Commercial Investment Real Estate Property, contact David Howes at: davidATdavidhowesDOTnet OR 702-501-9388!

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