Professor Raphael Bostic was interviewed by KFI-AM about the Fannie Mae and Freddie Mac takeover. The federal government stepping in will mean more stability in the market and probably a drop in interest rates for some home loans, according to the story. “For California, it will be a good thing,” said Bostic, director of the Master of Real Estate Development program at SPPD. “[W]ith the recent increase in the loan limit for Fannie and Freddie, a lot of homeowners will have access to those cheaper mortgages.”
The FHA is not Fannie Mae or Freddie Mac. Those entities buy up existing mortgages. The FHA is essentially in the insurance business, designed to encourage lending to riskier home buyers, those who have lower credit scores or don’t have the savings needed to put up a large enough down payment.
“FHA has historically been an entrée for a bunch of first time homebuyers to get access into home ownership,” says Raphael Bostic, a USC public policy professor and former HUD assistant secretary.
Bostic adds that the program with roots in the Great Depression has been especially important for minority home buyers.