Ginnie Mae Buy Down!
Written on Nov 12, 2007 by Charles Kim
During the 1970’s, Congress authorized the Government National Mortgage Association (“Ginnie Mae”) to subsidize the rates on mortgages funded through Fannie Mae. The rate buy down were used successfully to stimulate a severe housing slump.
The way the program worked was Ginnie Mae essentially bought low-rate loans from Fannie but paid for them as if they carried higher, prevailing market rates. The government absorbed the difference and the home buyer enjoyed the opportunity to purchase a home that normally would have been out of their price point and stimulate home buyers to get off the couch.
There’s been some prodding by the builders association along with real estate associations to have the incoming Obama administration revisit this subsidy of the past to help in 2009. They are hoping the Federal Government will step in and bring the rates down to 2.99% on a 30 year fixed loan for the first half of 2009 and then 3.99% for the second half of the year. It’s a historical fact that the last time this program was offered, it certainly stimulated the home sales and gave a huge jolt to any buyers on the sidelines to jump in with both feet not to miss out on this opportunity. We’ll have to wait and see if anything comes of these efforts.
