FANNIE MAE RELAXES INVESTOR REQUIREMENTS, INVESTORS CAN NOW GET UPTO 10 MORTGAGES

The signs are a changing. Instead of making it harder to get a loan, we are seeing just the opposite begin. One of the first steps happened last week. Previously, Fannie Mae had changed the rules for investors. They would not give a loan to anyone with 4 or more existing loans. That does not make sense, what is smart is to give loans to truly qualified individuals. That was the change last week. Now, an investor can have up to 10 loans with Fannie Mae! This is AWESOME! WE NEED the Investors back in the market. The previous rules forced most investors to pay cash, because they already had 4 or more loans.
Maybe this is why today's reading on Pending home sales here in the valley is 9,342. I have not seen Pending home sales here in metro Phoenix over 8,300 since 2005. Last week we sold over 1,400 homes. Again this level of home sales has not been seen for over 3 years!
Just my opinion...Jeff Cameron
Below is the press release from Fannie Mae:
In Announcement 09-02 Fannie Mae stated, “(We) are committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system. Fannie Mae is modifying out current policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements.”

Please be aware, that many lenders have not yet made the announcement as to when they will begin to purchase these loans. This coupled with the possibility of additional tax credits to all home buyers in the Senate version of the Stimulus bill, however could mean big news to the real estate market.

Eligibility Requirements
Eligibility Requirements: If Borrower owns Five to Ten Financed Properties

If the Property is a Second Home or Investment Property 1-Unit
Purchase Max LTV/CLTV 75/75% Minimum Credit Score 720
Limited Cash-Out Refinance Max LTV/CLTV 70/70% Minimum Credit Score 720
Investment Property 2-4 Unit
Purchase and Limited Cash-Out Refinance Max LTV/CLTV 70/70% Minimum Credit Score 720

Underwriting and Delivery Requirements
● The borrower cannot have any history of bankruptcy or foreclosure within the past seven years.
● The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
● Rental income on the subject investment property must be fully documented according to the Fannie Mae Guidelines: Rental Income.
Rental income from other properties owned by the borrower must be supported by two years’ federal income tax returns. Any streamlined documentation requirements must be disregarded and full documentation MUST be obtained.
● The borrower must complete and sign Form 4506 Request for Copy of Tax Return or 4506-T Request for Transcript of Tax Return granting the lender permission to request copies of federal income tax returns directly from the IRS. The lender must obtain the IRS copies of the returns or the transcript and validate the accuracy of the tax returns provided by the borrower prior to the loan closing.
● The borrower must have reserves for the subject property and for other properties currently owned by the borrower (i.e., other financed second home and investment properties) in accordance with the guidelines discussed below
● DU Refi Plus loans are exempt from the new requirements.

New Reserve Requirements
Fannie Mae is implementing new reserve requirements that apply to all second home transactions and to investor and second home borrowers that own or have an interest in multiple financed properties. The amount of required reserves varies depending on whether the subject property is a second home or investment property, and on the number of other financed properties the borrower currently owns.

The reserve requirements are as follows:
When the borrower will own one to four financed properties (including the subject property) the reserve requirements are as follows:
● 2 months of reserves on the subject property if it is a second home
● 6 months of reserves on the subject property if it is an investment property, and 2 months of reserves on each other financed second home or investment property.
When the borrower will own five to ten financed properties (including the subject property) the reserve requirements are as follows:
● 2 months of reserves on the subject property if it is a second home
● 6 months of reserves on the subject property if it is an investment property, and 6 months of reserves on each other financed second home or investment property.

FEDS ARREST EX-BEAR STEANS EXECS OVER HOUSING COLLAPSE

I have spoken with many people who don't understand how investment bankers in New York caused the housing crisis. Let me give it a quick whirl.

As property values continued to climb in the early part of this decade, the risk for a sub prime loan temporarily diminished. Even if the borrower was in trouble, there home had appreciated and they could sell, payoff their mortgage and put some money in their pocket. Investment bankers approved more and more risky loans from lenders. Lenders created all kinds of funky mortgages. They were making a ton of money and every thing smelled of roses.
Investment bankers were selling these mortgages to all kinds of investment companies: Insurance, retirement, etc... There was a certain amount of risk given to a sub prime mortgage.
The demand for these investments grew. The investment banks said to the lenders, give us more. So, they created more niche products. Basically just started giving anyone a mortgage with out checking their income. The biggest problem was all the "investors," they were buying with no money down. They had no ability to repay the loan without a tenant.
The the wall came tumbling down. 10's of thousands of homes were bought by "investors" that could not make the payment. Thus where we are today.
What was criminal? The investment bankers were not disclosing to their investors, buying these loans, how the level of risk had increased. They sold them as mortgage backed securities. Not as "super crazy and risky securities."
In defense of the investment bankers, they may not have been aware of the fraud being committed by all the unlicensed loan officers.

just my opinion!

Jeff Cameron

Ex-Bear Stearns Execs Arrested
By TOM HAYS,
Posted: 2008-06-19 09:24:51
NEW YORK (June 19) - Two former Bear Stearns managers have been arrested, federal authorities said Thursday, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market. Matthew Tannin was taken into custody outside his New Jersey home on Thursday morning and Ralph Cioffi was arrested at his New York City home, the FBI said. Authorities in Brooklyn are expected to release details later Thursday on the case against the men, who are ex-managers of Bear Stearns Cos. hedge funds that collapsed last year. A law enforcement official told The Associated Press that an indictment naming the men was the result of a yearlong federal securities fraud investigation. The former executives are suspected of misleading investors about the risky subprime mortgage market, the official said, speaking on condition of anonymity because the outcome of the investigation is pending. http://money.aol.com/news/articles/_a/ex-bear-stearns-execs-arrested/20080619070909990001

INVESTOR BUS TOURS

I heard many stories about investors coming from California and touring Arizona neighborhoods in buses and buying homes. I never saw or was part of that in 2004 and 2005. However, a week ago Sunday I took a group of investors out from California on a tour. They flew into Scottsdale airpark in the private plane. We met early Sunday morning. I reviewed the market and gave them a presentation on the state of our real estate market.

They asked many questions and demonstrated they were very knowledgeable investors. One of the investors had bought 50 home through me and my aunt back in the mid 90’s. He made a ton on money on those homes.

We set forth on a tour and checked out several homes. They feel the bottom has not hit but it is on the horizon. They have assembled about $5,000,000 to invest in nearly $15,000,000 worth of properties. They realize this in not the time to flip, but the time to buy and hold. They are looking for good rental properties. Their main goal was to go after the bank REO property and buy in bulk. I contacted several banks and spoke with the head guy with REO at one bank. They are not interested in selling in bulk to investors at this time. I was rather shocked. But the banks were very consistent with the fact they are selling their homes at market value, so why take a discount?

We moved on to the resale market. We identified the target market for homes they would purchase.

Our target for rental properties was as follows:

Tile roof homes.
Smaller homes in neighborhoods with larger homes.
Be as near to the city center as possible. Really trying to stay inside the 101 to the west and below Carefree Hwy to the north.
No areas like Surprise, Maricopa or Queen Creek.
3 bedroom minimum but 4 bedrooms is a bonus.
No pools.
1,600 square foot homes or larger.
A purchase price of between 70 and 80% of today’s value.
Based on rental rates, we want them to break even or be close to break even.

Sticking to these criteria should protect them from making bad decisions. The investor group realizes we are not at the bottom of the market. However, the bottom will not be known until we see it in hind’s sight. They believe now is the time to start entering the market and buy homes over a period time. The idea is like dollar cost averaging into a mutual fund. Some will be bought before the bottom, some at the bottom and some will be bought as the market starts to turn positive again.

I was very encouraged to see these investors to have a similar idea as I. That idea is that the market is getting better. Just like before when the market started deteriorating it takes a long time to turn a market. Our market started adding to inventory levels in March of 2005. Inventory levels went up by 40% in October of 2005. But that wasn’t the top. Buyers kept bidding up the market until mid 2006. It took over 1 year to affect prices from the time inventory levels started increasing. I think this might be a little different.

Inventory levels topped out in October of 2007 and today are at about the same level as they were one year ago. Today, sales are at their highest level in over 2 years. It appears as though the market is about 6 or 8 months into turning around. Last time it took about 16 months to turn from the time inventory levels started growing. I don’t know how far we are from seeing this market turn around. But I feel strongly that there is “light at the end of the tunnel.” The difficulty is that we won’t know the market has turned until we see it in hinds sight.