26 Sep 08 
The Constant Changes to Fannie Mae Lending Guidelines
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…And the Impact to the Real Estate Market.
The Real Estate Market is in the tank, toilet, down the drain or is flat out awful.
Wall Street is reeling and the Government is jumping in and attempting to save us from all the potential problems we “could” be facing.
All this fall out has created constant changes at Fannie Mae making it is more difficult to borrow money for Real Estate purposes than ever before. I am not here to judge BUT I have to give an opinion every once in a while so here it goes!
Looking around my Real Estate Marketplace and seeing all the troubled financial situations that have been created by shady lenders and unprofessional mortgage consultants and can’t help but wonder how this problem, being multiplied nationwide, isn’t more significant than it seems.
I know that foreclosures are up and that those people in troubled loans continues to rise. I see my email volume increase monthly with desperate people just looking for a suitable solution. I am not quite sure that tightening lending guidelines is the solution here because I see these changes as making things worse not better.
If these rules continue to tighten we will see very few homes being purchased, banks left with enormous volumes of foreclosed properties and financial difficulties running rampant across the country. It’s a ripple effect, financial problems in one industry causes problems in others and yet other so on and so forth.
OK now that I have that off my chest here is a list of changes to lending guidelines that will have a lasting impact on the Real Estate market:
- Unless you have more than 25% equity in your home expect the interest rate on a refinance to be considerably higher than someone who does. A three percent premium was just place on all loans whose loan to value exceeds 75% loan-to-value. Even at 75% you have a minimum 1.5% premium.
- So you are an investor and want to leverage your purchases. You are now limited to 4 properties!
- If you buy a property for cash for various reasons you will now have to wait 6 months to refinance that property for cash out.
- If you get a loan on a property putting down 50% and want to refinance some of that cash out, you will now have to wait 6 months.
- If you are looking to combine a first mortgage and a non-purchase second, a second mortgage taken out after the purchase, you will be considered a cash out transaction regardless of how long you have had that second mortgage. Because of this you are now limited to 75% loan-to-value on the new refinance.
- So you attempted to sell your home with no luck and have a need to refinance. Well you now have to wait a full 6-months even for a rate and term refinance. Making matters worse you are now limited to 70% loan-to-value for that refinance.
There are several more but these will give you a good sample of the Fannie Mae changes. I know there are those niche lenders out there who have the ability to arrange for a loan even if you don’t meet these guidelines but you can expect to pay a large premium for that loan. Remember Fannie Mae and Freddie Mac are the most common loans given to homeowners in the US. As the guideline keep tightening you can expect to have more issues with homeowners not being able to purchase of refinance.
As always, find a professional to work with and ask questions. If your representative doesn’t know the answer he or she won’t pay the consequences of not knowing, you will.
I am here to help so contact me via my BLOG at www.thelanegroup.blogspot.com or www.brentlane.wordpress.com
Tags: brent lane, fannie mae, fannie mae changes, first mortgage, freddie mac, freddie mac changes, home equity, homeownership, interest rate on refinance, lending guidelines, loan on a property, loan to value, Real Estate, real estate market, wall street government
25 Sep 08 Buy and Bail and FHA’s Response
So wouldn’t you know FHA found that the original rule for Buy and Bail was a little too steep and left many homeowners stuck in their home with no other course of action than to sell or head towards foreclosure.
If you are not quite sure what Buy and Bail means see my other articles on Buy and Bail Rules and Buy and Bail Part I and Part II
Now on to the new adjustments and how to work with this new rule to get what you want out of your Real Estate transaction.
- To be eligible to purchase a home using a FHA loan you would need to be relocating for a new job.
- The new home must reside outside a reasonable distance from your current residence and this is based upon underwriter’s discretion.
- Must have a full 1-year lease agreement from the closing date forward.
- You will need to show evidence of rental/lease by showing security deposit as cashed and/or first months rent.
- The adjusted equity position in your existing home is now 75% up from 70% but the appraisal can only be 6-months old or less. Now there is a small wrinkle in there that states you can show you put a 25% down payment based upon original purchase price but they may still require an appraisal to support the purchase price. Again the underwriter’s discretion.
Now the above rules are a good start but be prepared to have your potential rental income put under a microscope. FHA is extremely concerned about inflated rental agreements and has put in extra measures on the underwriting side of things to prevent fraud in this area.
Good news is that this amount of income that can be applied to your loan application for potential rents may be increased 15% in some cases and that will really help in qualifying for your new home.
Just in case you missed it, there are a couple ways to play the game:
- Add a non-occupying Co-borrower to you loan, must be a relative, to help you qualify.
- Make enough to cover both mortgage payments, current home and the new one.
- Short sale your home and buy before the negative reports on your credit report.
As always use a true Real Estate or Mortgage Professional because what you don’t know will hurt you in the end NOT the Realtor or Loan Officer.
Brent Lane
The Lane Group
Tags: buy and bail, closing date, co-borrower, existing home, fha, fha loan, home loan, Homes for Sale, lease agreement, loan eligibility, loan officer, loan qualifications, mortgage info, mortgage professional, Real Estate, rental agreements, rental income
17 Sep 08 Buy and Bail: How to Avoid Any Negative Consequences!
Buy and Bail: How to Avoid Any Negative Consequences!
So you own your home and your loan is upside down and the prices of homes are SO low that it’s hard not to consider moving into a bigger home for less than what you owe but you are concerned of what the repercussions may be.
Read through this email and response to see how things work and how you can apply it to your situation:
Hi Brent,
Read your article on your website and thought you might be the right person to answer some of my questions.
I have a property in M. CA, which I bought for $410k and now values $200k. I am thinking of the “buy and bail” option. I know it’s going to hit my credit which I am willing to take. What apart from the credit are other consequence should I look out for and can the bank come after my new house? Can they start taking income out of my paycheck? Can they put a lien on my new property? What are the tax consequences? Any help would be highly appreciated.
Thanks,
=Sabi=
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Here is my response!
Hi Sabi!
Thanks for the email and for reading my articles!
Just like most people in our area who bought in the past 24-36 months you are experiencing the impact of 50% decreases in the housing market!
Ok, so if I were in your shoes and wanted to avoid any and all consequences for “buying and bailing” I would first be sure I could buy before I even considered the “bail” side of things! In this market banks have eliminated what you might consider normal by not allowing someone to buy unless they meet certain criteria. Here are some points I wrote for another format but they apply here:
- To buy while owning and renting another property you simply need to qualify for both payments! This can be done by either having enough income or by adding a non-occupant co-borrower on an FHA loan to buy your new property.
- The other way is a bit more drastic and risky but you could sell your home and then qualify for the new one. This would take timing and negotiation skills but it can be done. Short-sale the current home and buy the new one before your credit reflects a settled account. (not perfect but possible)
- Both situations are not fraud, not illegal and pretty much moral!
Now on the consequence side of things, you really just need to be smart when “bailing” on your home. What I mean is you need to go about it in a way that will limit your exposure to banks by actively looking for “win-win” solutions for you and the bank. This would be in the form of a Short-sale or deed in lieu of foreclosure. It’s very important to approach the “bail” aspect properly because if you do that you will have the highest level of success and all your concerns will go away!
Read my posts on Loss Mitigation Negotiations and I look forward to putting it all together with you moving forward!
Let me know your thoughts.
Brent Lane
The Lane Group
www.thelanegroup.blogspot.com
www.brentlane.wordpress.com
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I hope this information was useful. As always I am here to help so please let me know your situation and I will do my best to help you the best way I know how.
Tags: buy a new home, buy and bail, credit score, decreased land value, fha loan, foreclosure, housing market, lien on property, non-occupant co-borrower, own your home, short sale, tax consequences
