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UPDATE: Freddie Mac & Investors

By
Real Estate Agent with Realty Executives Success

This is an update on my post from May 9th about Freddie Mac limiting investors to only 4 financed properties.

I had lunch on Monday with Zach Krause, a loan officer with Park National Bank in Naperville. Thankfully, we no longer shot messengers or else Zach would have had multiple holes in him. This from the Freddie Mac Bulletin on April 22nd:

 

With this Single-Family Seller/Servicer Guide (Guide) Bulletin, we are making the following changes to

our selling requirements:

■ Revising our requirements for second home Mortgages to restrict the number of 1- to 4-unit financed

properties owned by a Borrower

■ Revising our requirements for Investment Property Mortgages to reduce the number of 1- to 4-unit

financed properties that may be owned by a Borrower who owns more than one financed Investment

Property

■ Revising our "no cash-out" and cash-out refinance Mortgage requirements

■ Announcing that we are enhancing the Freddie Mac Selling System (Selling System) to:

􀂉 Permit the sale of Mortgages under the fixed-rate Mini Guarantor Program

􀂉 Expand the Life Cap ranges for certain adjustable-rate Mortgages (ARMs)

■ Providing information regarding Freddie Mac's calculation of loan-to-value (LTV) ratio

We are also updating the Guide to reflect the changes to credit requirements announced in our special

February 21, 2008 Bulletin, and refining those requirements to provide that also effective for Mortgages

with Freddie Mac Settlement Dates on or after June 1, 2008:

􀂄 Section 184 Native American Mortgages with LTV/total LTV (TLTV)/home equity line of credit

TLTV (HTLTV) ratios greater than 97% remain eligible for purchase, in addition to Home Possible

Mortgages with a minimum Indicator Score of 700, FHA/VA Mortgages and Section 502 GRH

Mortgages

􀂄 Sellers must also reduce the maximum HTLTV ratio when a property is located in a market with

declining values

Finally, we are providing additional guidance to assist lenders in implementing First-Time Homebuyer

education requirements for Home Possible purchase transaction Mortgages, which we modified in our

February 21, 2008 Bulletin.

 

 

If you are an investor, THIS IS A BIG DEAL. This goes into effect on loans with a settlement date of August 1st, 2008. Fannie Mae will not be far behind in implementing similiar regs (they may have, but I haven't seen or heard them yet)

I have spoken with 4 lenders as of today about this new cap. All 4 had no alternatives for financing. All 4 agreed that this certainly an invitation to mortgage fraud (which we certainly do not need). All 4 agreed this is not the end of credit tightening.

I will be writing an article on this later in the week and when I find a LEGAL alternative for investors (if you're considering mortgage fraud, please remove me from your rolodex), I will be passing it on.

Anonymous
harold

what if you already own 4 homes and paid cash/credit line  for another will you be able to refiance the home you already own ? which would be your 5th ? what if you own 4 homes,your wifes name is on three , can she purchase one more ?

Jun 08, 2008 12:44 PM
#1
Tim Soper
Realty Executives Success - Shorewood, IL

Harold,

My understanding is that you can only have 4 properties with mortgages; if you go to finance a 5th you will be denied. I think that would also apply to couples, but that I'm not certain of. August 1st is coming quickly.

Tim

Jun 08, 2008 04:56 PM
Anonymous
Harold

Just to be sure ... you said with mortgages ,that means if you own a home with no mortgage only a credit line then it would not count as one of the 4 correct ? A friend says he doesn't buy the homes in his name but in the name of his property management company , it doesn't make sense to me that a bank would fall for that , do you think that will work ?

  thanks

Jun 09, 2008 10:38 AM
#3
Anonymous
Tim

Harold,

You are correct, only mortgages, not credit lines. And it is only conventional mortgages (right now only Freddie Mac), but that is kind of misleading because FHA doesn't do non-owner occupied and most "portfolio" mortgages use Freddie or Fannie desktop underwriting, so that doesn't leave any other options. I would love to be wrong about that as that would make some of my investors happy, but no mortgage guys have shown me a different option.

Also, putting the property in a LLC or Corp name doesn't get around the fact that you are putting the mortgage in your name, not the company.

Tim

Jun 09, 2008 03:31 PM
#4
Anonymous
MAV

WHAT HAPPENS IF YOU BUY AS HOME TO LIVE IN IT ,THEN YOU CHANGE YOUR MIND AFTER THE CLOSING AND DECIDE TO RENT THE HOME. IS THAT A CRIME ? DO YOU NEED TO REFINANCE AGAIN? WOULD YOU EVEN CONTACT THEM TO TELL THEM YOU CHANGED YOUR MIND? AND WORSE CASE SENARIO WHAT IF SOMEONE SAID THEY WERE PLANNING GOING TO LIVE THERE AND NEVER DID ?

Jul 22, 2008 12:19 PM
#5
Anonymous
HK

TIM WHAT HAPPENS WHEN MANY HOMEOWNERS FORECLOSE,BANKS HAVE GOTTEN STRICT ON LOANS, ALL THESE HOMES ARE SITTING HERE NON OCCUPIED ,NO ONE IS MAKING MONEY ETC. WHAT WILL THEY DO WITH THE HOMES,IF NO ONE CAN GET QUALIFIED AND THEY HAVE STOPPED INVESTORS FROM BUYING MORE THAN 4 HOMES .wHO DO THEY EXPECT TO BUY THE HOMES ?

Jul 26, 2008 07:31 AM
#6
Greg Zaccagni
The Federal Savings Bank - Wheaton, IL
Illinois Mortgage Lender

These are frustrating time for real estate & mortgage lending professionals.  Let's hope the signing of the new housing act will begin the reversal of these guideline changes.

Who benefits from the new housing act?

Converting a Primary Residence to Second Home or Investment Property

Aug 06, 2008 03:11 AM
Anonymous
Anonymous

what if multiple borrowers buy an investment property, do you count the number of properties for each borrower and this should not be greater than 4 in total, or does each one borrower allowed to have 4 financed which would then total 8?

Aug 13, 2008 03:26 AM
#8