New Fannie Mae Guidelines

By Mark | February 21, 2009

 

We have received a lot of questions about the new Fannie Mae Guidelines, so here is the full document as released from:

Michael A. Quinn –

Senior Vice President

If you would like information about investing – please contact me.

Amends these Guides: Selling Updates to Multiple Mortgages to the Same Borrower Policy, Reserve Requirements, Reserves Definition, and Form 3170

 

Introduction

This Announcement contains updates and clarifications to several Fannie Mae policies as itemized below:

  • Multiple mortgages to the same borrower
  • Reserve requirements for investment properties and second homes
  • Definition of liquid financial reserves
  • Multistate 1-4 Family Rider – Assignment of Rents (Forms 3170 and 3170.53)

Multiple Mortgages to the Same Borrower

Selling Guide, Part VII, Section 101.05: Multiple Mortgages to the Same Borrower

Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system.

Fannie Mae is updating the policy that pertains to multiple mortgages to the same borrower. Fannie Mae’s current policy limits the number of one- to four-unit financed properties in which the borrower may have an individual or joint ownership interest to four financed properties when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements as outlined in this Announcement. Unless otherwise stated, these requirements apply to all mortgage loans whether underwritten manually or through Desktop Underwriter® (DU®).

Eligibility Requirements

Eligibility Requirements: Five to Ten Financed Properties

SECOND HOME OR INVESTMENT PROPERTY

Purchase 

1 Unit

MAX LTV/CLTV/HCLTV = 75/75/75%

MIN CREDIT SCORE – 720

 

Limited Cash-Out Refinance

1 Unit

MAX LTV/CLTV/HCLTV = 70/70/70%

MIN CREDIT SCORE – 720

 

INVESTMENT PROPERTY

MULTI UNIT

Purchase and Limited Cash-Out Refinance

2-4 Unit

MAX LTV/CLTV/HCLTV = 70/70/70%

MIN CREDIT SCORE – 720

  

Underwriting and Delivery Requirements

The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.

The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.

Rental income on the subject investment property must be fully documented according to the Selling Guide, Part X, 402.24: Rental Income. Rental income from other properties owned by the borrower must be supported by two years’ federal income tax returns. DU messages permitting reduced rental income documentation must be disregarded and full documentation must be obtained. 

The borrower must complete and sign Form 4506 Request for Copy of Tax Return or 4506-T Request for Transcript of Tax Return granting the lender permission to request copies of federal income tax returns directly from the IRS. The lender must obtain the IRS copies of the returns or the transcript and validate the accuracy of the tax returns provided by the borrower prior to the loan closing. 

The borrower must have reserves for the subject property and for other properties currently owned by the borrower (i.e., other financed second home and investment properties) in accordance with the following section – “Reserve Requirements for Second Homes, Investment Properties, and Multiple Financed Properties.”  

Lenders must use Special Feature Code 150 when delivering mortgage loans secured by second home and investment properties that meet the five to ten financed property requirements.

Note: These changes do not apply to HomeStyle® Renovation mortgage loans, which will continue to have a financed property limit of four properties. In addition, if the loan casefile is being evaluated under the DU Refi Plus™  guidelines, it will not be subject to the above eligibility, underwriting, and delivery requirements. Refer to the Desktop Originator®/Desktop Underwriter Version 7.1 April Update Release Notes for additional information about DU Refi Plus.

Applying the Multiple Mortgages to the Same Borrower Policies to DU Loan Casefiles

DU is not able to determine the exact number of financed properties the borrower owns but does issue a message on second home and investment property transactions when the borrower appears to have financed properties. This message will be updated with the DU Version 7.1 April Update release to be issued on all second home and investment property transactions in order to remind lenders of the new policies.

With the exception of DU Refi Plus loan casefiles, which are exempt from the new requirements above, the lender must apply the eligibility and underwriting  requirements manually to DU investment property and second home transactions as applicable.

Reserve Requirements for Investment Properties and Second Homes

Selling Guide, Part VII, Section 101.05: Multiple Mortgages to the Same Borrower; Part X, Section 601: Adequacy of Financial Reserves

Requirements for One-Unit Investment Properties in DU Currently, Fannie Mae requires at least six months’ reserves for all mortgage loans secured by an investment property that are manually underwritten and delivered to Fannie Mae. There is a lower reserve requirement applied (two months) for one-unit properties that are underwritten through DU. Fannie Mae is updating this policy to require six months’ reserves for all one- to four-unit investment property transactions underwritten through DU.

Reserve Requirements for Second Homes, Investment Properties, and Multiple Financed Properties

Fannie Mae is implementing new reserve requirements that apply to all second home transactions and to investor and second home borrowers that own or have an interest in multiple financed properties. The amount of required reserves varies depending on whether the subject property is a second home or investment property, and on the number of other financed properties the borrower currently owns. The reserve requirements are as follows:

When the borrower will own one to four financed properties (including the subject property) the reserve requirements are:

  • Two months of reserves on the subject property if it is a second home,
  • Six months of reserves on the subject property if it is an investment property, and
  • Two months of reserves on each other financed second home or investment property.

When the borrower will own five to ten financed properties (including the subject property) the reserve requirements are:

  • Two months of reserves on the subject property if it is a second home,
  • Six months of reserves on the subject property if it is an investment property, and
  • Six months of reserves on each other financed second home or investment property.

Note: The reserves calculation for a financed property is based on the monthly housing expense of the financed property. All reserve requirements are based on the new definition of reserves (PITIA) as defined below.

Applying the Reserve Requirements to DU Loan Casefiles

DU will be updated in a future release to require a minimum of two months’ reserves for all second home transactions and six months’ reserves for all investment property transactions underwritten through DU. DU is not able to determine the exact number of financed properties the borrower owns, and as a result, the lender must manually apply the reserve requirements to DU investment property and second home transactions as applicable. DU Refi Plus loan casefiles are exempt from the reserve requirements above.

Definition of Liquid Financial Reserves

Selling Guide, Part VII, Section 102.01: Occupancy Status; Part X, Section 302.01: Liquid Financial Reserves, and Section 601: Adequacy of Financial Reserves

Liquid financial reserves are those liquid or near liquid assets that are available to a borrower after the mortgage loan closes. Reserves are most often measured by the number of months of principal, interest, taxes, and insurance (PITI) that a borrower could pay using his or her financial assets.

Fannie Mae is expanding the definition of reserves to include all components of the monthly housing expense (PITIA), including:

  • principal and interest,
  • hazard, flood, and mortgage insurance premiums (as applicable),
  • real estate taxes,
  • ground rent,
  • special assessments,
  • any owners’ association dues (excluding any utility charges that apply to the individual unit),
  • any monthly cooperative corporation fee (less the pro rata share of the master utility charges for servicing individual units that is attributable to the borrower’s unit), and
  • any subordinate financing payments on mortgages secured by the subject property.

The revised definition of reserves applies to both manually underwritten mortgage loans and those underwritten through DU.

Note: Since DU already calculates reserves in accordance with this expanded definition, lenders should continue to enter all components of the monthly housing expense on the application including other financing P&I, hazard insurance, real estate taxes, mortgage insurance, homeowners’ association dues, and other proposed housing expenses.

Multistate 1-4 Family Rider - Assignment of Rents (Forms 3170 and 3170.53)

Fannie Mae is reiterating the requirement that borrowers execute the Multistate 1-4 Family Rider (Forms 3170 and 3170.53, as applicable) at closing for all mortgage loans secured by an investment property. This rider includes an assignment of rents requirement, which authorizes the transfer of rents and revenues to the lender.

Fannie Mae has also updated the Summary documents that are posted on eFannieMae.com for these forms to allow lenders to delete Section D. Rent Loss Insurance from the rider for all investment properties. Rent loss insurance is not required.

Effective Dates

The chart below outlines the effective dates for the changes described in this Announcement.

TOPIC – Multiple mortgages to the same borrower – five to ten financed property limit

EFFECTIVE DATE

Whole loans may be purchased on or after March 1, 2009 or delivered into MBS with issue dates on or after March 1, 2009.

TOPIC – Reserve requirements for investment properties and second homes & Definition of liquid financial reserves

EFFECTIVE DATE

Lenders are encouraged to implement these changes immediately. All whole loans purchased by Fannie Mae on or after June 1, 2009 and mortgage loans delivered into MBS with issue dates on or after June 1, 2009 must comply with the new policies.

TOPIC – Multistate 1-4 Family Rider

EFFECTIVE DATE

Immediately

As a reminder, when a lender delivers a mortgage loan that meets the requirements stated in this Announcement, the lender makes all representations and warranties applicable to the mortgage loan as set forth in the Selling Guide, and as amended by this Announcement.

 

Announcement 09-02 February 6, 2009 

### 

If you would like to take advantage of these new rules and invest in real estate – please contact me!

 

True Turn Key Real Estate Investing

By Mark | February 2, 2009

We are having good sucess at atracting real estate investors thru our affiliation with HomeVestors in Atlanta with our turnkey investing program.  Houses are available with major renovations completed, with a one year warranty, a renter in place and professional property management in place.  Better yet, they are for sale at about 80% of the banks appraised value. 

Properties are available all over the Metro Atlanta area or they can be found to match an area you are interested in.  Each property throws off cash flow to offset the intial investment in a very short period.

Properties are your typical 3 bedroom 1or 2 bathroom. Many are brick for low maintenance.  Renovations typically include roof, HVAC, kitchen reface, new lighting, new plumbing fixtures and of course, new paint and carpet.  Prices run from $57,000 and up.

Don’t Believe the News, Home Loans are Being Written

By Mark | January 21, 2009

Each day we hear on the TV, the radio and in print that banks are not lending money for housing.  I am here to tell you that just the opposite is true.  A few months ago few borrowers were seeking financing and the mortgage industry cut back on staff.  It only took a day or two to get a mortgage approved back then but our clients were still getting loans and getting them quickly.

Now with the historicly low rates, lenders are jammed with new loans and refinancing applicants, and it is taking weeks to get loans approved.  And I’m here to tell you they are still loaning money for homes.

Dont be affraid to get out there and find a house to buy.  FIrst get pre-qualified so you will know how much you can afford.  Then pick a great Realtor that knows the area you are looking in and start looking.  There are some great deals on houses and on mortgages.  Go, and make your dream of home ownership come true.

Great Opportunities with Gulf Opportunity Zone (GO-Zone)

By Mark | January 4, 2009

Click to watch the video – Gulf Opportunity Zone – Finding deals

If you are interested in reducing your tax liability, consider investing in the GO-Zone. We have found some great turn key investments – complete with instant equity, great financing, and a property manager to service them. You won’t want to miss these deals. Even experienced investors can get financed no matter how many mortgages they currently have in place.

Contact me for more information mark@TheREiTeam.com!

2009 Will be a Great Year

By Mark | January 1, 2009

My team of real estate agents met yesterday and not in a year have I heard such positive statement come from them.  They were speaking about how since the election that people were much more positive.  Then, since Christmas my team has been on the phone with home buyer after home buyer that are ready to start looking after New Years.

Long time team member, real estate agent Bill Wagner said he has been hearing from buyers that had previously stated they were waiting to see what was going to happen, and now they are ready to get out and buy.  We are seeing very positive signs that 2009 will be a great year.

Our best month for writing contracts was December and we will start off January with closings every week.  I am fired up about 2009 as it starts out so positive.  I had stepped out on a limb the middle of last year and declaired that November 4 (election day) would be the bottom of the housing market and it seems to be playing out that way so far.

Wishing each of you the best this New Years day and for the next 365 days.  Make each dayv count and stay positive.

Accountant Seminar

By Mark | December 13, 2008

Today my accountant, Roger Herring, held a seminar to address entity selection.  We learned about how important it is to make the correct decision on holding properties. 

When we started investing we chose to setup properties in land trusts for asset protection.  This arrangement plus using a management company to handle the tenants were some of the best advice we were given a newbee investors. 

Seek out the advice of knowledgeable team members to assist in real estate investing.  Don’t go it alone or be cheap. It can only cost you later.

Halloween Will be Different This Year

By Mark | October 10, 2008

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Now is the Time to Buy a Home

By Mark | September 29, 2008

The current climate of the economy with the bail out expected this week has seen a rise in mortgage interest rates.  Rates have been on the rise for weeks, and I expect them to continue to go up.   Now is the time to lock in as low a rate as possible, at near historic lows.

 

Additionally, when the bailout gets going there will not be as much a since of urgency to unload the properties as the banks had. Therefor the attitude of fire sale prices on behalf of the seller will be gone.  Remember the government typically moves slowly.  Housing prices will not ever be as attractive as they are now.

 

If you look at the cost of the rise of rates over the length of the entire mortgage it costs more in interest cost to wait. This, coupled with home prices rising, will price home ownership out of reach of many.

 

Now is the time to find that home and buy it. Your local Real Estate Agent can locate some wonderful properties out there at great prices.  Your mortgage company can lock in a 30 year rate on that home and you will feel real smart with those steady payments for the next 30 years.

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Watch the News and Lose all Hope

By Mark | September 25, 2008

I arrive back today from a 4 day vacation where cell phones and laptops don’t work.  Wow, what a different world we left behind when we left to come back.

 

We came back to a confused state for some people.  One person told me the government was failing and withdrew all offers for properties.  Another agreed with me that this is the best time there has ever been to buy real estate and wanted to write another offer.

 

The latter person will be far ahead financially in a few years when things get stabilized and the doomsayers will wonder where they missed out with prices back to normal.  Don’t hide your head in the sand, it is time to buy low.   

 

If you listen to news reports, you too will get caught up in the negative frenzy.  Rather, look at what the big boys are doing. Warren Buffett and major investor groups are out there buying things on sale. They are taking advantage of this fire sale, and so can you.

 

Please, if you ever thought about becoming a real estate investor, now is the time.  There are deals everywhere, if you just know where to look.  Lets all take advantage of these times and secure our financial future thru the power of real estate.

Government Takeover of Foreclosures Cures Economic Ills

By Mark | September 19, 2008

The fed is now moving to set up a corporation to take foreclosures from the banks to clear up the banks balance sheets.  Lets call it the FRC, the Property Recovery Corporation.  I imagine the PRC will buy properties for cents on the dollar to give the banks back some capital. Now, the banks are carrying them with zero value on their books since the loan is non-performing.

 

There are conservative estimates that there are $500 billion in bad loans the banks have on their books.  Based on the lending ratios this means the bank cannot loan 10 to 15 time that amount out in loans to businesses and consumers.  Hence the current credit crunch, where there is money everywhere but none to borrow. 

 

Now, say the PRC buys the property from the bank that is the tied to the non performing loan for 40 cents on the dollar loan amount.  The bank now has 40 percent of their lending power back on that loan.  Do that all across America and the banks will have $200 billion back on their books and can make loans on that amount.  The credit crunch somewhat clears up.

 

The PRC will have a cost of operation to hold and sell of 20 cents on the dollar of their assets, so the breakeven that they would have to sell the properties they take from the banks would be 60 cents on the dollar.  This arrangement could actually make money for the fed, by selling above the acquisition, holding and selling costs. 

 

In summary, the banks become more liquid so lending loosens up, and properties are sold more uniformly so the severe downward spikes of property prices would level off. 

I’m all for the PRC.  It would make a good investment if they sell shares.

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