Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months.
Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties. The restriction reversal does come with new minimum requirements, however.
Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:
- 720 credit score
- 25% downpayment for a 1-unit (30% for a 2-4 unit)
- No mortgage delinquencies in the last 12 months
- 6 months of reserves for each investment property
In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.
According to Fannie Mae, the change rationale is that experienced investors can “play a key role in the housing recovery”. Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.
Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.
And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they’ve been stymied by the 4-property restriction, too.
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5 Comments So Far»
It’s about time investors are allowed to “play a key role in the housing recovery”! This should’ve been done as soon as foreclosures began skyrocketing.
Does anyone know if it’s possible to get a mailing list of people who hold Fannie Mae investor loans? Even better would be a list of people who hold 4 Fannie Mae investor loans…
…with that information, I would think a good strategy would be to find people in the area where you have property to sell, and contact them with the news about the Fannie Mae policy change and offer to make a good deal to them for your property, complete with FNMA financing.
That’s my first pass at a back-door way to extract some value from the new Fannie Mae policy change.
Bryan Ellis
These new rules are basically useless for an investor like myself who specializes in multi-family properties such as quads. I own 7 quads that generate $3k per month in rental income for each building. Most of these buildings sold for $320k 18 months ago and will return to that value when the market changes. Right now there are many bank foreclosures that are selling for $169k, $179k and $210k. Under these new lending requirements, in order for me to purchase a property for say $200k I would need to have $3k * 6 month or $18k in reserve per building * 7 for a total of $126k in reserves. Plus I would need 30% down on the new purchase so that is an additional $60k. When you add in closing costs I would have to have an amount basically equal to buying the property with cash. So yes I can now get a loan but I have to have enough cash equal to the purchase price.
Well it is Good and Bad News it seems to me.
I would say Fannie Mae is trying to help their Public Image by increasing the loan numbers but playing to their high end Investors to gain favor for the Democrats.
With these requirements, only the Wealthy can play. The average investor like me and Jennifer above cannot be helped by these new rules.
So, in essence, I think it pretty much stinks and do not as yet see away I can use it to an advantage.
Locally Owned Banks are my life blood anyway.
I can undestand the feelings of Jennifer and the West Tex Man, but I think that every little bid helps and anything that can get this economy going is welcome by my. Not to mention that I am a licensed broker in Florida and I can use some of that business.
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