Fannie Revises Investment Property Guidelines

Fannie Mae, seeking to break the logjam in the housing crisis, loosened its loan restrictions for real estate investors and second homebuyers last week, issuing a new set of selling guidelines.

On February 6, 2009, Fannie Mae released Announcement 09-02, a five-page document that outlines the new rules for real estate investors who own multiple properties.

“Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors,” said Fannie, which accounts for 40 percent of the $12 trillion in U.S. residential mortgage debt. “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.”

The new Fannie Mae guidelines allow investor and second home borrowers to qualify for Fannie-backed financing on up to 10 properties if they meet strict underwriting and delivery requirements outlined in Announcement 09-02. Previously, Fannie had a “four property rule.”

Other Fannie guidelines include:

• Borrowers cannot have a history of bankruptcy or foreclosure within the last seven years.

• When more than four properties are financed, the borrower must have a minimum credit score of 720.

• There are also reserve requirements dependent on the type of property the borrower is purchasing.

• Buyers have to have 25 percent down for a second home and 30 percent for an investment property.

• The change is effective March 1, 2009. The requirements apply to any investment property or second home loan being delivered to Fannie Mae — regardless of whether Fannie is the investor on the borrower’s other mortgages.

• For professional investors with multiple investment properties, these new Fannie Mae changes are good news. But the restrictions on loan to value (LTV) and cash reserves are tighter than in the past. Still, it allows investors to finance a large number of properties. Now we need Freddie Mac to make a similar move.

To download the policy guidance and get more information on qualifying and underwriting, go to: Announcement 09-02

What are your thoughts on the new Fannie Mae guidelines?