Dec

5

Last month I shared some details with you on a loan I was working on (and finally closed) for one of my long-time clients. It was a refinance on a 4-unit in Denver. We tried to do it as an unseasoned cash out and we actually got an approval at 75% LTV but the lender declined it because they owned more than 10 properties.


“They reduced the LTV
10% because they own
more than 5 properties
and another 5%
because the property is
in a Fannie Mae
designated area of
declining value.”

We resubmitted to another lender and they said although the program allows us to go to 75%, they would approve it at a max of 60% LTV. They reduced the LTV 10% because they own more than 5 properties and another 5% because the property is in a Fannie Mae designated area of declining value. Now, Fannie Mae doesn’t require that a lender reduce LTV for declining value, but they all do anyway to err on the side of caution. The rate on this program at 60% would have been 7.375% at par but the borrower owes 67% LTV and would have had to bring an additional $21,000 to closing and he didn’t want to do that.

There was one more program that the lender had available for this deal that would allow him to do a no cash out refinance at the 67% LTV but the rate was 8.375% at a cost of 2.250% in discount. Not a real attractive deal but when we ran the analysis they chose to go with the higher rate. It was a good decision because even though they could have saved $250 a month it would have taken them more than 5 years to recoup their cash outlay.In the end, a 4-unit, non-owner occupied, area of declining value stated income loan for a borrower with 10 properties on his credit
report closed but it took two months and three lenders to get it done.

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