Fannie Mae Revises Investment Property Guidelines

Last year Fannie Mae reduced the allowance for the number of properties financed from 10 properties to 4 properties. On February 6th they released Announcement 09-02 revising the allowance for the number of properties financed back to 10 properties. To see the full amendment to the Fannie Mae Selling Guide go to Announcement 09-02.

In Fannie Mae's words "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."

When more than 4 properties are financed the borrower must have a minimum credit score of 720. For 1 Unit Second Home or Investment Properties the maximum Loan-to-Value (LTV) will be 75%. For 2-4 Unit Investment Properties the maximum LTV will be 70%.

Announcement 09-02 also includes new reserve requirements for second homes, investment properties and multiple financed properties.

When the borrower will own one to four financed properties (including the subject property) the reserve requirements are:
- two months reserves on the subject property if it is a second home,
- six months s reserves on the subject property if it is an investment property, and
- two months 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 reserves on the subject property if it is a second home,
- six months reserves on the subject property if it is an investment property, and
- six months reserves on each other financed second home or investment property.

This change in the Fannie Mae Guidelines should have a positive effect on real estate sales. Although the restrictions on LTV and cash reserves are tighter than in the past, it allows investors to finance a larger number of properties. I look for Freddie Mac to make similar revisions to their guidelines.

Call me with any questions you have concerning the current market.