According to Freddie Mac, and many of the larger Private Mortgage Insurers, look for even more stringent rules for certain types of "high risk" transactions in the coming months. Their analysis indicates certain types of loans create the highest levels of delinquency, and are attempting to greatly curtail their risk and exposure.
Freddie's directive dated April 22nd, for loans to be funded August 8th and thereafter, states that purchasers of second homes and investment properties will not qualify for Freddie-backed financing programs if they own four or more investment properties or second homes - INCLUDING the new home under consideration. It covers investors with "single or joint ownership" in multiple investment properties - check with your accountant to see how investment properties or second homes in trust may be treated.
Also from Freddie Mac - those taking cash-out in their refinances will not be able to have another Freddie-backed re-fi within six months from the original re-fi - assuming the last re-fi increased the mortgage indebtedness by more than 5% of the previous mortgage amount. Their statistics indicate 80 percent of re-finances involve high-cash-out proceeds.
Private Mortgage Insurers, who provide coverage for lenders offering loans higher than 80% LTV, are removing qualification for several types of loans in areas they consider "in decline."
Genworth Financial will no longer consider PMI for buyers of 2nd homes in the State of Florida. Further, they will not insure any cash-out re-finances, limited-doc loans, and all investment property loans in markets in their "declining" list.
The PMI Group has tightened its Jumbo Loan Guidelines, for those seeking loans of greater than $417,000 here in the Chicago area (the new Jumbo Loan Threshold is higher in some metro markets). They will now require a minimum FICO Credit Score of 700 - fairly high - and a minimum down payment of 10%.
Additionally, PMI Group will no longer insure stated income loans, any cash-out re-fi's, and all investment-property secured mortgages in one of its "distressed" market areas.
Even in stable or growth markets, cash-out refinance loans on investment property for rental, and second homes, as well all three and four unit buildings, will no longer qualify for PMI Group mortgage insurance. Neither will interest-only loans on non-owner-occupied investment property.
Recently, the largest U.S. Mortgage Insurer, MGIC, stopped coverage across the country on "Option ARM" loans, where interest rate increase resets are blended back into the mortgage, creating negative amortization. MGIC will also not insure cash-out refinances on stated-income loans, non-traditional types of mortgage loans, and loans with buy-downs on the interest rate.
Please see our post this evening at BlogChicagoHomes.com for more information, as well as a link to Kenneth R. Harney's article in today's Chicago Tribune.
DEAN & DEAN'S TEAM CHICAGO