Investment Property Conventional Loans Have Tighter Restrictions

This BREAKING NEWS Article Is About Investment Property Conventional Loans Having Tighter Restrictions From Fannie Mae And Freddie Mac

Breaking News from mortgage giant Fannie Mae on Wednesday, March 10th, 2021 about Investment Property Conventional Loans. Fannie Mae and Freddie Mac are the two mortgage giants in the United States. The role of Fannie Mae and Freddie Mac is to provide liquidity mortgage markets. Fannie and Freddie are the two largest buyers of mortgages in the secondary market. Mortgage lenders have a warehouse line of credit to originate and fund their loans. Once the loans fund, lenders need to sell the loans they funded on the secondary mortgage markets.

Most lenders will sell the loans they fund to larger mortgage bankers. Eventually, most mortgages end up being sold in large bulks to Fannie Mae and Freddie Mac. This is why it is important what Fannie Mae and Freddie Mac decide on the types of agency guidelines they set on owner-occupant, second home, and investment property mortgages. In this breaking news article, we will discuss and cover the breaking news about Fannie Mae and Freddie Mac imposing tighter restrictions and guidelines on Investment Property Conventional Loans.

Restrictions And New Guidelines On Investment Property Conventional Loans Skyrocket Mortgage Rates

The recent surge in bond yields on the 10-year treasuries has skyrocketed mortgage rates in recent weeks. Mortgage rates have hit a 12 month high in the past two weeks due to the surge in bond yields. What this means is rates have increased as much as 0.75% to 3.25% on a 30-year fixed rate for prime borrowers. Even with this sudden spike, mortgage rates are still at historic lows.

Many experts and analysts are worried about what is going on in the mortgage and bond markets. First is the sudden surge in mortgage rates. Now Fannie Mae’s announcement on investment property conventional loans. Many are confused and wondering what is going on in the housing and mortgage markets.

Breaking News From Fannie Mae Tightening Guidelines On Investment Property Conventional Loans

The breaking news from Fannie Mae tightening guidelines on investment property and second home conventional loans hit the housing and mortgage markets hard.

Michelle McCue, a senior vice president of mortgage banking at Gustan Cho Associates issued the following statement:

In a letter sent to sellers on Wednesday (3-10-21), Fannie Mae, the government-sponsored entity (GSE), said it was tightening the underwriting criteria for second homes and investment properties. The change in policy will take effect for loans submitted to Fannie’s loan delivery system on or after April 1, and for loans delivered into MBS pools with issue dates on or after April 1. In explaining the changes Fannie Mae said, Recent amendments to their senior preferred stock purchase agreement with Treasury impose additional risk criteria on the loans Fannie Mae acquires. One of those restrictions is a 7% limit on all acquisitions of single-family mortgage loans secured by the second home and investment properties. Previously, both Fannie Mae and Freddie Mac tightened their underwriting standards in response to the coronavirus pandemic.

The news from Fannie Mae on March 10th, 2021 has shaken up the mortgage markets. What this means is tougher agency mortgage guidelines on second and investment homes. It also means it will cost much more in fees and added loan level pricing adjustments which mean higher mortgage rates.

The Recent Sudden Surge In Mortgage Rates Due To Sudden Spike In Bond Yields

It is true that mortgage rates have skyrocketed in the past week due to the surge in bond yields on the 10-year U.S. Treasuries. What this translates to is mortgage rates have surged 0.75% in the past two weeks to 3.25% on a thirty-year fixed-rate mortgage for prime borrowers on single-family homes. With the news from Fannie Mae, rates on second homes and investment properties are expected to skyrocket due to higher loan level pricing adjustments.  Even with the sudden spike in mortgage rates in the past two weeks, rates are still at historic lows.

Rates have skyrocketed in recent days and weeks. This is because of fears of inflation due to the Biden Administration spending spree with the $1.9 trillion dollar coronavirus economic package. Many criticize the new Biden Administration about the $1.9 trillion economic aid stating it is not really economic aid but rather Democrat’s spending wish list.

Fear Of Inflation Pushes Bond Yield Higher Which Means Higher Rates

Does fear of inflation drive bond yields, which means higher interest rates?

A large of the $1.9 trillion aid has been earmarked to help far-left Democrat-led states with their loss of revenue due to their extended state shutdown. The Biden Administration is expected to print money and go on a spending spree. This will no doubt spike inflation. The Central Bank normally increases rates if there is a fear of inflation. Fears of inflation mean higher interest rates which mean higher mortgage rates. The research team at Gustan Cho Associates is doing more research on what type of impact this breaking news will have on the mortgage markets and economy. Will it affect non-QM loans? Non-QM loans have become increasingly popular lately. This holds especially true with investment property non-QM loans.

Second homes normally did not have large loan level pricing adjustments. Mortgage rates on second homes were maybe a slight tad over rates on single-family homes. However, with the breaking news on March 10th, 2021, it seems like that is about to change. The team at Gustan Cho Associates will update our viewers in the coming days and weeks about what the newly updated guidelines on investment homes and second home mortgage guidelines from Fannie Mae will mean to homebuyers and real estate investors. Stay tuned!!!

Leave a comment