Aug
8
Housing Bill Signed by President- Changes Go Into Effect October 1st
August 8, 2008 | Leave a Comment
Last week, President Bush signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.- The cost of the program which would begin on Oct. 1 and be in place for just a few years will be funded by fees from Fannie Mae and Freddie Mac, along with fees paid by both lenders and borrowers.
- The law authorizes FHA to insure up to $300 billion in loans.
- A permanent increase in conforming loan limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie Mae and Freddie Mac to a maximum of $625,500 from $417,000. This will help those looking for higher loan amounts as the “jumbo market” interest rates have taken a beating as of late.
The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming. At this point, we do not know what the maximum mortgage limit will be in the Denver Metro Area. I will keep you informed once I hear.
- A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home purchase price but no more than $7,500.00. Essentially, this is an interest free loan that has to be paid back to the government over 15 years (i.e. $500 per year). This is available to anyone between April 8th, 2008 and June 30, 2009
- A new affordable housing trust fund. The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie Mae and Freddie Mac.
- Grants to states to buy foreclosed properties The law grants $4 billion to states to buy up and rehabilitate foreclosed properties.
- Fannie and Freddie guarantee the purchase and trade of mortgages and own or back to $5.2 trillion in mortgages.
- The biggest change of all: FHA Seller Down Payment Assistance Program is going away October 1st. The new minimum down payment is 3.5%.
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Jul
22
Your LLC Loan is Gone!
July 22, 2008 | 2 Comments
For almost two years now I’ve been advising anyone who will listen to begin a refinance strategy to peel residential investment property loans off of their personal credit into portfolio loans in the name of their entity or LLC. No one listened. I heard a bunch of excuses such as “it’s too expensive” or “I don’t have enough equity” or “I don’t think I need to do that.” Well, a couple of things have happened in the last month or so to prove that (once again) I was right. Hate to say I told you so, but…
Beginning August 1st, Freddie Mac is limiting the number of financed properties an investor can have to 4. Fannie hasn’t yet announced a reduction but some Fannie lenders have voluntarily reduced their max to 6 in anticipation of an announcement.
Yesterday, Wachovia announced that they are no longer accepting loans. Wachovia was the bank that did the residential LLC loan. So, now all those investors that have been calling in a panic in response to the Freddie Mac rule have waited too long. Ix-nay on the efinance-ray. That’s pig latin for “no can do an LLC loan.”
So, what to do now? If you have more than 4-6 financed properties on your personal credit and you want to employ this LLC refinance strategy, your broker can’t help you. I get at least two calls a day from investors that are looking to buy or refinance a property and they are essentially unfinanceable with conventional financing. They always ask me to “be creative.”
Well, my creative solution for those investors ended yesterday. If you are in this boat, you may be able to help yourself by developing a relationship with a portfolio lender on your own. A lender that will loan in the name of your entity and doesn’t sell their loans into the secondary markets. But I can only think that if you could do that, wouldn’t you have done that already?
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