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.
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