In 2009, Fannie Mae and Freddie Mac rolled back the mortgage rule that prevented real estate investors from financing more than 4 properties per borrower. At the time, investors were limited to 4 properties financed, which included their primary residence.
A few months later in 2009, Fannie Mae changed their mind and rolled back their mortgage rule that prevented real estate investors from financing more than 4 properties back to 10. Today, the maximum number of allowable, financed properties is 10. You wouldn’t know it, though — few banks actually offer the 5 – 10 loan program. The main reason is the big banks want to be able to deliver their loans to both Fannie Mae and Freddie Mac. Having Freddie Mac stop at four, many of the larger lending institutions chose to go the conservative route and limit their exposure only to four.
Fannie Mae has always been more aggressive in my opinion than Freddie Mac. After the knee-jerk reaction that both GSE’s took during the mortgage meltdown, Fannie Mae recognized that it only made sense to return to the original 10 limit. When they did relaunch the 5 – 10 multi loan program, they changed their program guidelines to be more restrictive, i.e. down payment requirements, credit score requirements and cash reserve requirements.
`Good News is October 26, 2015 Freddie Mac issued changes which positively affected real estate investors. Freddie Mac increased their number of allowed financed properties from 4 to 6 when financing an investment property or second home. In addition, Fannie Mae followed Freddie’s move in September 25, 2016 and increased the tolerance for risk to allow investors to purchase up to 6 loan SFR’s at 20% down. With these new changes investors now can put 20% down on a SFR up to 6 loans. In addition, they can also do a cash out loans on properties 5 and 6 without any timing constraints. Another great advantage is borrowers with less than 720 FICO scores can also do an additional two loans as long as Fannie Mae’s and Freddie Mac’s underwriting engine approves the loan.
The next major change with Freddie Mac was the removal of the two year landlord history experience requirement which affected the utilization of rental income. Now that this has been removed, borrowers will be able to utilize 75% of the gross rental income with a lease agreement or 75% of the average market rent analysis provided on the Fannie Mae appraisal report.
I am pleased to see these changes have been made as I feel they were long overdue.