Investor Changes to Pricing on Second Homes and Investment Properties.
With market confirmation of the continued health of the housing industry following an historic year for refinance volume in 2020, The Treasury Department delivered increased restrictions to the GSEs as a part of a decade-long effort to return FNMA, Freddie Mac to solvency, and out of Conservatorship.
On March 10th, Fannie Mae announced tightening of the underwriting criteria for second homes and investment properties, including the requirement to run DU and receive an approve / eligible delivery. The change goes into effect April 1, 2021. In addition, Treasury issued an amendment to their charters limiting the purchase of single-family mortgage loans secured by second homes and investment properties to 7% of overall purchases.
To give you a perspective, loans secured by investment and second homes are more than 7% of our current volume. Any loans LSMG delivers over that percentage would not be eligible for purchase by Fannie or Freddie. Those loans would have diminished value in the alternative investor pool.
Immediately following the release on March 10th, Capital Markets added LLPAs to loans secured by second homes and investment properties – to align with the new reality and industry standard.
This is a fluid situation, and should that risk dimmish, we will respond to better pricing quickly.
It is imperative that you price your loan through Optimal Blue prior to any rate discussions with your borrowers as the LLPA may vary from day to day.
While we plan to avoid it, loans secured by second homes and investment properties may be delivered to investors/aggregators rather than service them ourselves as is our standard policy. Please be aware, should you close an investment or second home during this period it may be sold to another investor.
Again, should the Treasury Department remove the caps on purchases of these properties, we will return to our standard practices and service your investment and second home loans under the LSMG name.
If you have any questions or concerns, please reach out to your Account Executive. And as always, thank you for your continued business.