Posted about 14 years ago

10 mortgages - now what?

The Fannie Mae guidelines were revised again last year back to the original 10 mortgage limit for individual investors. During the financial crisis they lowered them to 4. What is interesting is that even though nearly every mortgage is backed by the government some originators are still stuck at the 4 limit. You would think they wouldn't care as long as they qualify for the government guarentee. But look around because there are increasingly more lenders that will do 10.

For anyone that has hit that magical 10 mortgage limit determining what to do next can be frustrating. If you are not willing to buy cash (particular if you are buy & hold) and you don't like working with partners then here are some other options:

Private equity: There are firms that have pools of investors hungry for yield and not afraid to take some risk. The cost of financing can be pretty steep. I have been offered anywhere from a reasonable 6-7% + 3 points to 8-10% + 10 points.
Blanket mortgage: Traditionally used only in commercial real estate this product is starting to show up for residential financing. Typically backed by private equity I have even heard of some hedge funds getting involved. Rates seem to be reasonable but you have to keep in mind that all the properties under the blanket are collateral and if you want to sell one you need to get permission to take it out of the blanket. Also the re-financing costs are high when you consider you have to refinance all the properties at once. The good news is that to other lenders this just shows up as one mortgage so you can reset for 10 to 1 and start over again.
Government financing: Some of the government mortgage financing has no mortgage number limit. Ironic that they don't follow their own guidelines.
Your spouse: If you have 10 mortgages in your name and your spouse does not have any then time to switch. I am surprised to see husband & wife RE investors putting both their names on the mortgages instead of just one. This is dumb as it just cuts your maximum from 20 to 10. If your spouse doesn't make enough income you can always pay your spouse to manage the properties. Form an LLC with your spouse as a salaried employee. Then you pay the LLC.

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Disclaimer: Check with your lawyer, accountant, or other professional advisor before using this information.

10 mortgages - now what?

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