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.

I remember the day that Orlando and Aminah were married. I have always admired them because they are young, hardworking, educated, and they don’t care what the Joneses do because they are focused on their plan. Buying a home and creating sweat equity for themselves was also a part of the plan.

We have been in a contract on three different properties in Bronzeville and we went to the closing table once. Every property came with its own set of issues not to mention city liens that the City of Chicago wasn’t willing to subordinate first lien position on which is why we didn’t close.

No matter what the obstacle my clients never gave up on their vision. Ironically with every property there came huge price reductions. The first property they were willing to spend $255k, the second property $202k, and finally the one they bought was $162k and the sellers paid 6% towards their closing cost. That is a major savings.  My clients will have to wait several months before they can move in due to the renovations but they will make it through that hurdle as well.

The current market will make the next set of millionaires. You don’t want to kick yourself in the butt because you set on the fence.

There isn’t a person unscaved from the harsh reality of the recent rise in foreclosures.

The statistics are alarming as the world of real estate sees the market shift from a sellers market to a buyers market. As I drive through the streets of Chicago there is a sea of boarded up properties that bring a gloom to some neighborhoods. Illinois is ranked 15^th in the nation among foreclosures and 84% of Illinois foreclosures are here in Chicago.

Is it the adjustable rate mortgage, or are there bigger culprits? According to Irvine, Calif-based RealtyTrac Inc., 45% of foreclosures are a result of job loss while 28% of foreclosures are attributed to ARM resets at a higher interest rate. Mortgage fraud is responsible for only 9% of foreclosures. As a result of urban revitalization and the surge in condos, there are several other factors that must be taking into consideration. Lenders were eager to give a 100% financing and allow the homeowner not to escrow their taxes. These homeowners are in total shock when twelve to twenty four months after their purchase they received their first fully assessed tax bill that might be double what the homeowner had anticipated.

We are only in the infancy phase of foreclosures. Between October 2007 and December 2008, 900 billion dollars in ARM’s will reset to a higher interest rate causing the avalange to thrust forward with additional force. Most homeowners were well aware of the fact that they had acquired an ARM at the time they purchased or refinanced their property. What they didn’t realize was that their property might not continue to appreciate or that over forty lenders would leave the market place leaving high LTV borrowers and borrowers in need of a stated loan with no option of being able to refinance their property. The ARM has proven to be problematic but it’s only one of the numerous problems that the homeowner has to face.

Always use empathy and not judgment when dealing with a seller/client who is facing foreclosures. There was a time when foreclosures only plagued the lower income now trends are showing that the middle income and affluent are also being affected. Sellers are in desperate need of an educated Realtor^® to help them as they are being approached daily by scam artist looking to drain them of any equity they might have left.

Over the past year foreclosures business has increased by double digits. Now is the time for Realtors^® to educate themselves on how to service their clients in this foreclosure driven market. REBAC has designed an information packed 8 hour class that allows Realtors^® to hone in on there buyer agency skills, learn how to unveil opportunities for their buyer/clients in pre-foreclosures, unveil the secrets on how to negotiate a short sale and still earn a commission, and complete an elective for the ABR designation.

There is light at the end of the tunnel. Realtors^® have to go back to the basics. The first step in this process is to receive the proper education and training on the foreclosure process. If business isn’t coming to you, you have to go where the business is and currently that is in foreclosures.