Fannie Mae Guideline Changes on the Way

Hopefully the new Fannie Mae changes will bring investors back to the real estate market.

Many investors have been stopped in their tracks with current Fannie Mae requirements that do not allow a purchaser of investment/income producing properties to have more than 4 financed properties.

Multiple Mortgages to the Same Borrower and Reserve Requirements Changes

Fannie Mae has issued Announcement 09-02, Updates to Multiple Mortgages to the Same Borrower Policy, Reserve Requirements, Reserves Definition, and Form 3170.

Multiple Mortgages to the Same Borrower

To help support housing recovery, we are introducing an expanded policy regarding 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 our mission to provide stability, liquidity, and affordability to the nation’s housing system.

To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70–75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any investment property or second home loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

Second home and investment property loans to borrowers with five to ten financed properties will be accepted for whole loan purchase or delivery into MBS with purchase dates on or after March 1, 2009, and new Special Feature Code 150 will be required at delivery.

Desktop Underwriter® (DU®) will be updated in the DU Version 7.1 April Update release to issue a message on all second home and investment property transactions reminding lenders of the requirements for borrowers with multiple financed properties. A Supplement to the Release Notes for the April update has been issued to provide details (link below).

Reserves Definition and Policy Requirements

We also are updating our definition of liquid financial reserves to include all components of the monthly housing expense – which will now be known as PITIA – including homeowners’ association dues, special assessments, ground rents, and subordinate financing payments.

For loans on second homes and borrowers with multiple financed properties, we are implementing new reserve requirements (refer to Announcement 09-02 for details).

Assignment of Rents

Investment property borrowers are required to execute a Multistate 1–4 Family Rider (Assignment of Rents) (Form 3170, or 3170.53 for Puerto Rico) to authorize transfer of rental revenues to the lender. We are reiterating this existing requirement, and have updated the Summary documents for the Riders to delete the requirement for rent loss insurance.

If you have any questions regarding the Fannie Mae change or want to explore purchasing an investment property or second home, please feel free to call or e-mail, 843-224-5398 or Owen@OwenTyler.com.