Jul
13


Fannie-Mae’s Surprise for All Cash Buyers

Wednesday, July 13, 2011

Fannie Mae quietly made a rule change last week that could be of huge significance for cash buyers of houses -- whether they're investors or owner-occupants -- starting immediately. Call it cash-outs for all-cash players.
The company modified its long-standing requirement that all-cash home purchasers must be on the title for at least six months before pulling out money from the house by obtaining a mortgage. Now you can do it -- if you qualify -- virtually overnight.
Under Fannie's new "delayed financing" option, buyers paying cash to gain a competitive advantage -- lower prices, cleaner and quicker deals than purchasers requiring financing -- can now turn around and pull out substantial money from the transaction shortly after settlement.
Given the growing role of all-cash purchases in many markets, Fannie's change could create new opportunities for players in the bank-owned, foreclosure and short-sale segments, including Realtors, small-scale investors and ordinary buyers who have access to ready cash.
Fannie Mae's rule change allows some of these all-cash purchasers to tap their equity and put it to work elsewhere -- perhaps buying additional real estate. Of course, there are some limitations and restrictions:
The mortgage cannot exceed the documented amount of the borrower's initial cash investment in the house to be mortgaged. That's no matter how much you subsequently invest on remodeling improvements.
The all-cash purchase must have been arm's-length, with no conflicts of interest among the parties.
The purchase must be documented with a HUD-1 confirming that no financing was involved (i.e., there's no existing mortgage lien on the property).
The sources of funds used for the all-cash purchase must be documented, including bank statements, personal loan documents or a home equity line secured by another property. But to the extent that loans were used for the cash transaction, they "will be required to be repaid on the new HUD-1."
The loan-to-value (LTV) limit follows Fannie's rules for cash-out refinancings. Generally, it's a 70 percent LTV limit, but for owners of two to four investor units the maximum LTV limit is 65 percent. All of Fannie's regular underwriting, credit and documentation requirements for cash-out refinancings also apply.
In its guide change on June 28, Fannie offered no rationale for liberalizing its rule out of the blue. A Freddie Mac spokesman, Douglas Duvall, said in an email that his company not only is retaining its six-month seasoning rule, but "we are not considering a change to this requirement."
Fannie Mae spokeswoman Amy Bonitatibus said that her company is making its change to serve the growing number of purchasers making all-cash offers to obtain advantageous pricing.
Fannie Mae quietly made a rule change last week that could be of huge significance for cash buyers of houses -- whether they're investors or owner-occupants -- starting immediately. Call it cash-outs for all-cash players.The company modified its long-standing requirement that all-cash home purchasers must be on the title for at least six months before pulling out money from the house by obtaining a mortgage.

Now you can do it -- if you qualify -- virtually overnight. Under Fannie's new "delayed financing" option, buyers paying cash to gain a competitive advantage -- lower prices, cleaner and quicker deals than purchasers requiring financing -- can now turn around and pull out substantial money from the transaction shortly after settlement. Given the growing role of all-cash purchases in many markets, Fannie's change could create new opportunities for players in the bank-owned, foreclosure and short-sale segments, including small-scale investors and ordinary buyers who have access to ready cash.

Fannie Mae's rule change allows some of these all-cash purchasers to tap their equity and put it to work elsewhere -- perhaps buying additional real estate. Of course, there are some limitations and restrictions:

The mortgage cannot exceed the documented amount of the borrower's initial cash investment in the house to be mortgaged. That's no matter how much you subsequently invest on remodeling improvements.

The all-cash purchase must have been arm's-length, with no conflicts of interest among the parties.

The purchase must be documented with a HUD-1 confirming that no financing was involved (i.e., there's no existing mortgage lien on the property).

The sources of funds used for the all-cash purchase must be documented, including bank statements, personal loan documents or a home equity line secured by another property. But to the extent that loans were used for the cash transaction, they "will be required to be repaid on the new HUD-1.

"The loan-to-value (LTV) limit follows Fannie's rules for cash-out refinancings. Generally, it's a 70 percent LTV limit, but for owners of two to four investor units the maximum LTV limit is 65 percent.

All of Fannie's regular underwriting, credit and documentation requirements for cash-out refinancings also apply.In its guide change on June 28, Fannie offered no rationale for liberalizing its rule out of the blue.

A Freddie Mac spokesman, Douglas Duvall, said in an email that his company not only is retaining its six-month seasoning rule, but "we are not considering a change to this requirement.

"Fannie Mae spokeswoman Amy Bonitatibus said that her company is making its change to serve the growing number of purchasers making all-cash offers to obtain advantageous pricing.

 






Comments subject to review.
Monday, May 29, 2017
Generational Housing Needs and Their Effect on the Market

Saturday, May 13, 2017
Consumer Agency Launches Tool To Help You Find A Cheaper Mortgage

Saturday, April 8, 2017
King County home prices resume their climb

Tuesday, September 17, 2013
Keys to Help Buyers Compete in a Seller's Market

Thursday, May 23, 2013
10 Things Buyers Need to Know

Sunday, April 14, 2013
Women Consider Owning a Home to be a Vital Component of the American Dream

Tuesday, March 19, 2013
The 8 Top Home-Selling Mistakes You Should Avoid

Thursday, January 10, 2013
Fiscal Cliff Bill a Benefit for Homeowners

Sunday, December 2, 2012
Should You Help Your Adult Kids Buy Their First Home?

Monday, October 29, 2012
Economists Bullish on Housing Recovery

Sunday, October 21, 2012
What is moving housing upward?

Monday, September 10, 2012
Five Common Mortgage Myths

Thursday, August 2, 2012
It's a great time to be a seller

Saturday, June 23, 2012
Are appraisers falling behind on home value increases?

Wednesday, June 6, 2012
Is Now the Time to Invest in Rentals?

Wednesday, May 30, 2012
4 Guidelines for Successful Negotiations

Thursday, May 24, 2012
5 Reasons Now is the Time to Buy

Tuesday, May 15, 2012
Seattle-Bellevue-Everett Unique Housing Market

Thursday, May 3, 2012
Buying a home won’t get much cheaper

Tuesday, April 24, 2012
New Rules to Speed-up Short Sales

Thursday, April 5, 2012
Home Prices to Rise in 2013

Thursday, March 22, 2012
Buying Cheaper than Renting in 98 of Top 100 Major U.S. Markets

Sunday, March 11, 2012
Five Tax Breaks for Homeowners

Thursday, March 8, 2012
How the FHA Loan Plan Can Help You Refinance

Thursday, February 16, 2012
Housing Crisis to End in 2012 as Banks Loosen Credit Standards

Estella said
"That is a beautiful shot with very good lighting ." about Women Consider Owning a Home to be a Vital Component of the American Dream
on Sunday, May 12, 2013 @ 9:57 AM

Chris White - Team Leader said
"Unfortunately you are not alone. It's more than an outcry. The powers that be really need to come down harder on Bofa than they already are. Working on these short sale for over 2 years now I've uncovered down right fraud happening on the lenders parts. If they cared more about moving this country forward than protecting their own wallets then they would cut the red tape and approve these short sales in a timely manner. Our team made the wise decision to get BofA loans which were FHA or Freddie Mac backed, approved prior to listing on the market. Then we can list the home as "Price Approved" and close in 30 days. In this instance BofA does a full appraisal, rather than an incompetent "Broker Price Opinion" (nothing against agents but they have no idea how to make adjustments on comparable homes) and then the bank issues an "Approval To Participate" letter which dictates what price we can go on the market and take anything north of 88%. I really do hope your situation improves. " about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:15 AM

Lisa Zeiner said
"We made an offer 4 months ago to BofA, and have heard nothing. It was a cash offer which is better than the zero money they are collecting now. And since the people don't care they are trashing the place, by the time BofA gets around to it our offer will be gone as the place is a mess!! Septic issues now, garbage being dumnped. All of this could have been avoided if BofA really wanted to correct their cash flow problem and sell these properties in a timely manner. They cry about cash but then do nothing intelligent to fix the problem" about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:06 AM

Jones Ramirez said
"Thank you for the work you have done into this post, it helps clear up a few questions I had." about How do appraiser’s determine a homes value?
on Tuesday, April 19, 2011 @ 10:07 PM

HollyRobsonf said
"Hey - I am certainly happy to find this. great job!" about Bank of America to Offer Principal Reduction to Underwater Borrowers
on Wednesday, April 13, 2011 @ 6:45 PM