Home : Blogs : Mike Jones : Tucson AZ Home Loan Info

Fannie Mae Continues to Tighten Credit Guidelines: Interest Only Loans

EDIT: Quote from Thomas Jefferson, one of our Founding Fathers, in 1802:

"I believe that banking institutions are more dangerous to our liberties than standing armies.
If the American people ever allow private banks to control the issue of their
currency, first by inflation, then by deflation, the banks and corporations that will
grow up around the banks will deprive the people of all property - until their children
wake-up homeless on the continent their fathers conquered."

My story:

My borrowers bought a beautiful second home here in Tucson at the end of May, and wanted to make the smallest possible monthly payment until their retirement in a few years.

The loan that they chose has an Interest Only feature that reduced their payment by many hundreds of dollars when compared to a fully amortized payment. They paid 20% at closing, and financed 80%.

Fannie Mae continues to tighten credit guidelines

Today, FNMA reduced the maximum LTV/CLTV (loan to value / combined loan to value) to 70% on all interest only loans. Had my clients waited a month, they would have had to come out of pocket another 10%!

Fannie Mae announced that they will no longer accept the following transactions with an interest only feature:

Cashout
FLEX mortgages
My Community loans
Investment properties
Duplex to Four Family units
Credit scores below 720
Borrowers with less than 24 months reserves

I'm Mike in Tucson, your preferred Tucson Mortgage Lender.

NMLS #223495

SUNSTREET MORTGAGE llc ~ Mortgage Bankers, Not Brokers!
Offices in Scottsdale, Tucson, and Nogales, AZ, and Albuquerque, NM.

Reach me any time on my Blackberry (520) 349-9090

Posted by Mike Jones on 06/08/2010 05:39 PM

Comments (36)

Interest Only Loans in the ActiveRain Channel

interest only loans, fannie mae, tight credit, mike in tucson, tucson mortgage, sunstreet mortgage llc

Generate short URL

Post is included in group: The Economics of Real Estate
Post is included in group: Realtors®
Post is included in group: Local Expert
Post is included in group: Just Ask Mike
Post is included in group: Arizona Mortgages

36 Comments on Fannie Mae Continues to Tighten Credit Guidelines: Interest Only Loans

JUN

2010

Another nail in the financial coffins of many future home buyers and two more nails in the coffins of those who won't be able to sell for lack of "qualified" buyers.

Lenn,

Fannie Mae could eliminate all risk to their organization if they just closed the doors!

Mike in Tucson

HOLY MOLY! That is some tight guidelines! I am laughing at your #2 remark Mike. It is funny but not so funny :-/

Mike - It would be "nice" if Fannie Mae could just use logic, but they've already demonstrated that's a scarce commodity.

Tighten? More like strangle! Wow! Thanks for the info Mike!

@FANNIE - Why don't you just tell us you don't want to lend money?

While I was rarely a fan of Interest Only Loans, they do have a place ... like many other financing tools. While I don't necessarily disagree with the LTV requirements they've put out on Interest Only Loans, some of those other parameters are a bit too much. No Investment Properties? And the pendulum swings ... ridiculously to the other extreme.

Keeping up with the guideline changes for financing has become it's own full-time job! While I applaud the decision to walk away from interest only loans which required no down-payment or verification, it seems that an individual with 20% invested might merit a second look or perhaps a little higher interest rate. Just thinking...

Thanks for the heads up. I think the lending industry needs to come up with some quality programs that make sense.

Thanks for the update Mike. Stay cool.

Mark,

You're welcome! thanks for the video of the javelina.

Jerry,

From your mouth, as they say, to God's ears!

Lola,

Ain't it the truth!

Jason,

It's a mess. I tell people "Money is real cheap, but they don't want you to have any." While that's an over exaggeration, it's feeling more and more like reality.

Debra,

I like your choice of words!

John,

Yup!

Renee,

It's getting close to the truth, isn't it?

Mike in Tucson

It seems that every day we hear about a significant change to the mortgage and/or real estate industry. If only the changes would make sense. Today I attended a presentation on the new LEEDS mandates for contractors. Soon no one will be able to jump before asking the government how high.

Sharon,

The only way to change things is with your VOTE! Thanks for commenting.

Mike in Tucson

Mike, thank you for the posting. I appreciate you sharing the information. I find that Active Rain is the best source for learning new information quickly.

Mark,

You're welcome! Thanks for stopping by.

Mike in Tucson

Mike,

Interest only loans are a great tool, when used by knowledgeable/suffocated buyers. There use/miss-use by Joe Paycheck has brought this on!

We have to live with what we sow, were luckily to have any alliterative after the infamous option ARM!

Bill

Fannie Mae has no money...but a blank check in a bill that was passed late one night. I don't get it. I don't get it, I DON'T get.

So what you are saying, there are about 10 people who actually qualify for an interest only loan?

Tough - don't know what else to say. It's just harder every day.

JUN

2010

Hello:

Fannie Maecould have eliminated the mortgage-backed securities that THEY created.

The credit is going to keep tightening. It's too bad that Jefferson hasn't been around to keep advising us. We'd probably be in a better place.

Fannie Mae and Freddie Mac are soon to be a thing of the past. I surprised there isn't charges yet for past dealings.

Terry,

It will be interesting to see if you're right. I don't agree that they will go away; some mechanism has to be in place to create and issue the Mortgage Backed Securities. As to whether charges will yet be brought, you may be right.

Christine,

I've started reading the founding fathers writings again.

Aaron,

Without mortgage backed securities, mortgage products as we know them wouldn't exist. You wouldn't be able to sell a house except to someone with cash.

Lori,

But we keep on plugging.

Michael,

Many fewer today than yesterday...

Missy,

You load sixteen tons, what do you get?
Another day older and deeper in debt.
Saint Peter, don’t you call me ‘cause I can’t go;
I owe my soul to the company store.
– Tennessee Ernie Ford

Bill,

Ditto my comment to Missy!

Mike in Tucson

So, even those that can afford to pay their mortgages are having difficulties making do because of these guidelines.

Mike, very interesting points. It seems as if the fools on the hill, continually succumb to the pressures and payoffs from lobbyist and other special interest groups. TJ was absolutely right...

I love the quote from Thomas Jefferson. Our founding fathers were genious in how they could almost predict the future. We should have stayed on course and followed the guidelines they set.

Erik,

There's nothing keeping us from getting back on track.

Michael,

Vote 'em out.

Gabe,

The tightened guidelines won't affect anyone making a current payment, just those wanting to buy and finding one less tool in their toolbox.

Mike in Tucson

Mike,

Great use of quote. FNMA keeps tightening the rope on us. When will anyone figure out that it isn't the programs that were the problem, it was the people utilizing them.

Yes, this market continues to change daily and it is frustrating on all sides of the transaction. The best we can all do is stay on top of these things and prepare our clients for the market they are facing.

Yes preparing our clients for these changes seems to be the best thing we can do, FNMA can start wethinking their strategies to help get qualified people into homes.

I'm sure we will see additonal restrictions in the next several months

You know the sad part about this is that in creates an inverse effect on the economy. The overall goal is to create growth of the economy, job growth, and overall GDP growth. Instead further tigthening of guidelines does nothing but minimize the amount of growth (job creation). If money isn't available, people aren't investing, building, or anything else. Which way is up....nobody seems to know.

Why are they even bothering to lend money. Just say no.

JUN

2010

Mike, walking on the grounds of Monticello is inspiring to me. Jefferson's home and ground speak to the genius of the man and this is one of his most riveting quotes that is now haunting this generation because it is so true. I'm so glad that my faith isn't in men!

JUN

2010

So let me get this right, what you are telling me is that they are trying NOT to get more homes sold!

These folks were buying a SECOND HOME! Why is it even acceptable for Fannie Mae to guarantee this loan in the first place?!?! Sheesh.

JUN

2010

"I believe that banking institutions are more dangerous to our liberties than standing armies.
If the American people ever allow private banks to control the issue of their
currency, first by inflation, then by deflation, the banks and corporations that will
grow up around the banks will deprive the people of all property - until their children
wake-up homeless on the continent their fathers conquered."

Two things:

Jefferson was not seeing the future, he was seeing what had already taken place in the past.

And, the Federal Reserve is already in the process of doing this. (the Fed is not a government entity, BTW)

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?

Mike Jones

Tucson, AZ

More about me…

SUNSTREET MORTGAGE, LLC

Address: 2840 E Skyline Dr, Suite #230, Tucson, AZ, 85718

Office Phone: (520) 344-6943

Cell Phone: (520) 349-9090

Email Me

kvoa.com

Listings

Links

Archives

Find AZ real estate agents and Tucson real estate on ActiveRain.

Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.