No Negotiation of Preforeclosure Sales Commission

Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers

Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in the aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.

In the midst of the mortgage meltdown, Fannie Mae changed it guidelines limiting investors to a maximum of four mortgages.  This limitation affected many investors’ ability to secure financing with reasonable pricing.  However, it seems that Fannie Mae has had a change of heart. 

Effective March 1, 2009, the four mortgage limited is being lifted.  As stated in the February Announcement, “Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors.  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 limit will be increased to a maximum of ten mortgages. 

This financing tool is only for the experienced, responsible investor.  A 720 minimum credit score is required, including 25% down on 1-unit purchases and 30% down on 2-4 unit purchases.  In addition, the reserve requirements are even more stringent.  If the borrower owns one to four financed properties (including the subject property), the borrower must have six months reserves for the subject property and two months reserves for each of the other financed properties.  If the borrower owns five to ten financed properties (including the subject property), the borrower must have six month reserves for the subject property and six month reserves for each of the other financed properties. 

It is important to note, that Fannie Mae has also expanded the definition of reserves.  Normally reserves are measured by the number of months of principal, interest, taxes and insurance (PITI) payments that a borrower could make with personal financial assets.  This definition has been expanded to include all components of the monthly housing expense:
PITI, ground rent, special assessments, owner’s association dues (excluding utility charges for individual units), cooperative corporation fees (less the pro rata share of the master utility charges for servicing individual units), and any subordinate financing payments on mortgages the property secures. 

The last guideline to address is the Multistate 1-4 Family Rider.  This rider is required for closing of all mortgage loans secured by an investment property.  The rider authorizes the transfer of rents and revenues to the lender in the case of default. 

I must admit, that as a mortgage professional, it was music to my ears to hear and read about Fannie Mae’s new policy updates.  I know many investors that were bound by the four mortgage limit who are now excited about the opportunities that exist in the market place.  If you are an investor or have been thinking about investing in real estate, now is the time to take action.  Pick up the phone and call an experienced loan originator to help you get started.

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About the Author:
AC, the Mortgage Closer, is a licensed loan originator in the Chicagoland area. For more information, visit her website at www.ownsomethingtoday.com or her blog at www.realmoneytalks.net.