Suspension of the 7% rule for FAnnie Freddie is HUGE

15 Replies

Read this morning that through intense lobbying by the mortgage industry ( some one got through to someone to talk sense into them)
the govmit suspending the 7% rule  this should put some downward pressure on Investor and second home interest rates.. Or at least I would think so.  

It will be interesting to see how loan pricing evolves in the next few weeks or months. I've seen quite a few alternate lending products that are pretty competitive with MFR loan pricing even on gov backed loans. So I wonder can the gov loans really have a significant pricing improvement? This is one of those scenarios where I'm glad I've 'learned' to work with a good mortgage broker that can help me understand where the market may be headed.

Originally posted by @Matt Devincenzo :

It will be interesting to see how loan pricing evolves in the next few weeks or months. I've seen quite a few alternate lending products that are pretty competitive with MFR loan pricing even on gov backed loans. So I wonder can the gov loans really have a significant pricing improvement? This is one of those scenarios where I'm glad I've 'learned' to work with a good mortgage broker that can help me understand where the market may be headed.

well i know investor pricing popped up a bit when it went into effect..  so hopefully it will put downward pressure since the banks wont be constrained at the 7%.. 

Yesterday, I got "good news, we removed our extra 2nd home / rental property hits, because we're so generous and nice!" emails from about 1/3 of the lenders I work with. Another batch came through this morning. 

"Base" rates have been trending up for the last couple days (after trending slowly down for a few weeks prior), but the removal of this hit is far more substantial than those upticks. Anyone looking to purchase/refi a rental property, today, should be being offered substantially better pricing than a week ago.

Reminder: there's still the baseline rental property hit that's been there for years, and is still there. This is just the removal of the extra lender-specific hits that banks were forced to impose in an attempt to taper down to 7%.

Originally posted by @Chris Mason :

Yesterday, I got "good news, we removed our extra 2nd home / rental property hits, because we're so generous and nice!" emails from about 1/3 of the lenders I work with. Another batch came through this morning. 

"Base" rates have been trending up for the last couple days (after trending slowly down for a few weeks prior), but the removal of this hit is far more substantial than those upticks. Anyone looking to purchase/refi a rental property, today, should be being offered substantially better pricing than a week ago.

Reminder: there's still the baseline rental property hit that's been there for years, and is still there. This is just the removal of the extra lender-specific hits that banks were forced to impose in an attempt to taper down to 7%.

Chris thanks for chiming in..  U have to think restricting supply makes rate's rise so hopefully by removing this will have the opposite effect to some extent.

Originally posted by @Joe Splitrock :

@Jay Hinrichs thanks for bringing this forward. The way I read this, they say suspension to allow time to review for changes. I guess the official change will either make this permanent or bring back some version of it. 

http://www.mortgagenewsdaily.c...

Agree Joe  however I have to think since they did suspend it they are ( govmit) thinking maybe that was not the best idea ..

Lest we forget the drying up completely of investor mortgages in late 08 to 2010 or so caused one hell of a mess to our economy  

My rate dropped from 4.75 to 3.99, according to my loan officer, due to this change. Background so the numbers have meaning - Conservatively approved to 400k, FICO 800, clean history, 20% down payment on non owner-occupied investment property, 30 yr fixed conventional loan. Got pre-approved 10 days ago quoted 4.75, notified of the better rate and the reasoning on Wednesday.

@Jay Hinrichs I'm not well educated in the loan product realm, what is this "7% rule" or the actual name of it so I can Google it to learn more about it. Currently have a investment property and a primary residence on a VA loan at both at 2.25%, possible positive impact for me?

Originally posted by @Kevin Phu :

@Jay Hinrichs I'm not well educated in the loan product realm, what is this "7% rule" or the actual name of it so I can Google it to learn more about it. Currently have a investment property and a primary residence on a VA loan at both at 2.25%, possible positive impact for me?

No effect on you you would not refinance a 2.25 VA loan for any reason.

7% was the number that the feds came out with 6 months or so ago and said banks and lenders of government backed loans could not lend more than 7% of their activity in investor or second homes..  so you have capital drying up some what. which caused rates to spike up.

now they suspended that rule and I was thinking maybe rates will come back down a tad.. and one person responded and said that was the case.