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
