Lending Will Get Tighter Soon

Fannie and Freddie announced last week that they will only purchase 7% of all closed mortgages of second homes and investment properties going forward. In 2019 and 2020 the share of mortgage on second homes and rental properties averaged about 8%. But, last month 10.1% of all mortgage applications were for second homes (3.6%) and rentals (6.5%). Why does this matter?

Fannie and Freddie I expect will soon be tightening their underwriting standards on loans for second homes and rental properties to reduce demand. Don’t be surprised if the down payment requirement for a second home increases from 10% to 20% is one change I could see happening.