RE Investor Loans Get More Expensive Again

Sales of homes for non-primary residence use rose to 17% from 14% one year ago in May across the country according to NAR. Vacation home sales accounted for 6.5% while sales of homes to rent out rose to 10.5% in May 2021.

Earlier this year Fannie and Freddie announced new restrictions on how many rental property loans and second home loans they could buy due to new requirements from the Treasury Department on Fannie and Freddie. Initially the requirement was to keep these loans down below 7% of their loans securitized. Fannie just announced their limit will now be just 3% in July going forward and Freddie’s limit will be 6% in July. OUCH!

Currently, about 75% of the companies we sell loans to won’t even accept a rental property refinance loan. They don’t want them. Everyone else charges a very high fee ranging from 150 to 250 basis points to the price of the loan. Now, we as a company are raising our fees further on rental property loans we sell direct to Fannie and Freddie to 50 bps on purchase loans and 175 basis points on refinances.

But, there is new hope that this restriction may end soon after Mark Calabria, the head of FHFA, resigned after the Supreme Court ruling last Wednesday. The Community Home Lenders Association sent a letter on Wednesday to FHFA’s new Acting Director Thompson and Treasury Secretary Janet Yellen asking that the 7% cap on investor loans and second mortgages be removed.