Fannie Mae sent lenders a notice stating additional risk criteria are coming for the loans it acquires from lenders. The 2021-08 Lender’s Letter outlines the changes imposed by the amendments to the First Preferred Share Purchase Agreement (PSPA) between the Federal Housing Finance Agency (FHFA) and the Treasury Department at the mid-January. The letter focuses on the new limit of 7% on the acquisition of loans guaranteed by second homes or investment properties. All limits are measured as 52 week moving averages. As the share of investors and second homes in acquisitions is already over 7% since 2013, this new rule will certainly have an impact.
In addition to this limit, all second home and investment property loans must be:
- Subscribed with Desktop Underwriter (DU)
- Receive an approved / eligible referral
- Be delivered as a DU loan as part of the loan delivery.
Earlier this month, the Urban Institute (UI) criticized the expected changes in GSE risk policies due to the changes in the PSPA. UI was particularly critical of the limit on acquisitions of investment loans on the grounds that loan price adjustments made these loans a lucrative part of GSE’s portfolios. The higher income not only offsets any additional risk, but also helps subsidize other purchases. Additionally, investor ownership of rental housing in properties with one to four families accounts for half of all rental units and perhaps a larger share of those rented by low- and middle-income families. Limiting the market, UI maintains, reduces the resources through which GSEs can reduce the cost of borrowing for underserved communities. Our UI review summary can be read here.
The above policies will be effective for whole loans submitted to Fannie Mae as of April 1, 2021 and for loans delivered in pools of mortgage-backed securities with issue dates on or after that date. The company said that due to the need to comply with these restrictions in the PSPA, it would monitor second home and investor loan deliveries at the lender level and work with lenders who have excessive delivery volume of. these types of loans. .
The company says it will update its Sales Guide and Eligibility matrix to reflect the changes next month. MND expects a letter announcing similar, if not identical, changes to be sent by Freddie Mac.