Foreclosure wave coming? Lenders backing off on investment loans

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Foreclosure wave coming? Lenders backing off on investment loans

Jack B.
Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

They were a month ago, suddenly they are not. They told me that the secondary market they sell the loans to has stopped buying them. Switched to my other lender, heard the same thing, they are now capping how much investment loans they do. It seems to me they are limiting their exposure to a crash with the upcoming end to foreclosure moratoriums. Yet some data I've seen shows not that many households are actually delinquent, unlike 2008 where almost 30% of real estate transactions were short sales, REO's or foreclosure auctions.I'm about to buy 3-4 more houses, and this is a bit worrying. I will say I am glad I cash out refinanced a few last fall....Anyone have any data on sources for said data on what they expect to happen to the real estate market once the moratoriums end?

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
5y

I don't have any data but I am certain the new Fannie rules on investment homes that went into effect 4/1 is having a major effect on the availability of investment loans. 

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  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y

    I don't have any data but I am certain the new Fannie rules on investment homes that went into effect 4/1 is having a major effect on the availability of investment loans. 

    Podcast Guest on Show #243
    Skyline Properties
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  • Elise Marquette
    Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
    5y

    If the eviction moratorium ends and people start paying again, one would think that would prevent a wave of foreclosures, no? The thought being that once people start paying their rent again, the mortgage gets paid thus no foreclosure. I believe FNMA capped investment and second home loans to 7% of their portfolio before there was rulings to end the moratorium (although I'm sure the GSEs had to have some foresight to know the moratoriums were going to end at some point??) I would be very interested to see the occupancy types of mortgages currently in forbearance.

    I have also heard there are not too many delinquent households and I do think people have more equity built up in their homes than they did in 2008. We are dealing with an entirely different animal than we were back in 2008 so I don't think it's fair to compare this housing market for 2006-2008. 

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  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    5y

    The curtailing of rental property financing is not driven by market fears, it's driven by gov't policy.

    The gov't is keeping rates artificially low with the intent of helping average homeowners (the idea being that "average homeowner" takes his $500/mo mortgage savings and spends at least $450 of it each month on consumer junk, maybe a new car payment, maybe eating out, whatever, thus stimulating the economy). The previous administration was run by a real estate mogul and was totally fine with all the real estate investors taking advantage. The current administration is not totally fine with it (and let's be honest, if I save a typical landlord $500/mo on a refi for one of his rentals, he ain't gonna go spend $450/mo of it on economy stimulating consumer junk, we'd be lucky if he spends $100/mo of it, landlords are good savers, not spenders), so a gov't agency capped rental properties at 7% of total on a per lender basis. Most lenders were at 9% to 15%, somewhere in that range, so they have to taper down.

    Not all lenders were/are >7%, and some are still below, with capacity to do more. Local independent mortgage broker will be able to plug you into a lender at <7% that's still doing rental property loans in your area. The difference between a lender at 4% or 5% with capacity to do more, and one at 13% in the process of tapering down, will be night and day. 

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