Are government-guaranteed mortgages unfair?

Some commentators may question the federal government’s level of involvement in the mortgage market. At least two entities that guarantee mortgages, Fannie Mae and Freddie Mac, are government sponsored. That involvement may raise certain expectations and policy questions.

Under the current system, a government-guaranteed mortgage might have additional requirements that a borrower must meet to qualify for the mortgage. The guarantee helps banks sell mortgages to investors, but it may also exclude certain types of borrowers from qualifying for a mortgage.

One financial lobbying group recently questioned whether access to credit may depend on factors that ultimately result in a disparate racial impact. The group’s president claimed that over half of African Americans who apply for a common mortgage are denied. However, that estimate may not account for borrowers who qualify for a mortgage insured by the Federal Housing Administration. An individual might be able to obtain an F.H.A. mortgage even if he or she could not get a Freddie Mac or Fannie Mae loan. 

An attorney that focuses on mortgage financing may regard the requirements surrounding government-backed loans as old news. For an individual applying for a mortgage or seeking mortgage refinancing for the first time, however, the process can be confusing and scary. Without a lawyer, an individual may not know whether he or she has obtained the most favorable terms. An attorney with experience in a broad array of real estate transactions will be in a better position to provide such context and zealous advocacy to clients.

Source: The New York Times, “Dispute Arises Over Number of Mortgage Denials to Blacks,” Peter Eavis, May 23, 2014