Hey BP family,
Ive got another property into hard money, started the conversation early with the lender to refi out of hard money,and they sent me packing. something changed monday, and they said for the next month or more their investors pulled funds and didn't want any more investment properties or second homes.
So how should I go about finding a conventional fannie/freddie lender who will allow me to refi 75% LTV under 6 months, without a tenant, based on the market rents the appraiser brings back? is this sort of lending now dead? is this a short term hiccup?
@Michael B. Lenders are slightly more limited in how many investment property loans they can offer. Some are just raising rates on these, rather than eliminating the loans entirely, so it's definitely still possible. If you already own the property though, most lenders will want a lease in place rather than 75% of the market rent.
What took place on 2/10/2021 was that FHFA the regulatory body for Fannie Mae and Freddie Mac put out a new rule that states that any lender that sells to Fannie/Freddie can no longer sell any mortgages that are 2nd homes and investment properties in amount above 7% of the total loans that lenders sells to Fannie/Freddie. From what I hear, the lenders were selling 2-3 times the amount of volume compared to the new 7% rule. So lenders that chose to keep closing these loans immediately raised their rates for these loans by 2.25%. So good luck finding a lender with the old low rates we had as recent as 2/9.
Non-QM is designed for real estate investors and their rates were about 2% higher than Fannie Freddie, so if they don't raise their rates, it would be the same rates as Fannie/Freddie would be now, but much easier to close the loan. Non-QM does not have to follow Fannie/Freddie rules, so it will be much easier to close a Non-QM going forward than that of Fannie/Freddie, which may be hard to find for that loan type.
I suspect that there will be even more innovative products coming out of the Non-QM space as well. Non-QM could also raise their rates if volume for them gets so big that they need to curb the additional closing times due to additional volume.
FHFA did this with Fannie/Freddie because they are worried about the impending uptick in foreclosures due to COVID and the fact that the administration allowed all these forbearances. 2.1 million households are in forbearance and that 12 month period ends this month. The foreclosure moratorium ends in June, so expect to see higher foreclosure rates starting then.
Landlords were some of the hardest hit, so this is why FHFA targeted these loan types.
I hope this helps.
Hey @Michael B. might be worth talking to a non-bank direct lender and getting into a 30 yr fixed DSCR loan. DSCR loans are based on/underwritten to the property's cash-flow (and your personal income/DTI do not come into play). They're slightly higher on rate & costs. Typically, if there's debt on the property being refinanced, you can do a cash-out at 75% LTV in as little as 3 months. If you own it free & clear, then you can get that same 75% LTV at the 6 month mark. Rate/term refinances can be done with no seasoning and go up to 80% LTV. Rates are in the 4.75% - 5.875% for most. It depends on your credit score, the DSCR (which is Gross Rent / PITI), the property type, loan amount, etc. Pretty easy to get a quote and see how the numbers play out (you won't have to provide sensitive info or get your credit pulled).