Fannie Mae has sent lenders an
advanced notice that additional risk criteria is coming for loans it acquires
from lenders. Lender Letter 2021-08 lays
out changes mandated by amendments to the Senior Preferred Stock Purchase
Agreement (PSPA) between the Federal Housing Finance Agency (FHFA) and the
Department of the Treasury in mid-January. The letter focuses on the new 7
percent limitation on acquisitions of loans secured by second homes or
investment properties. All limits are measured as 52-week moving
averages. As the investor and second home share of acquisitions is already
above 7 percent and has been since 2013, this new rule will certainly have an impact.
In addition to that limit, all
second home and investment property loans must be:
- Underwritten with
Desktop Underwriter (DU)
- Receive an
- Be delivered as a
DU loan in Loan Delivery.
Earlier this month
the Urban Institute (UI) criticized the expected changes to the risk policies
of the GSEs due to the PSPA changes. UI was especially critical of the limit on
acquisitions of investment loans on the basis that loan level price adjustments
made those loans a lucrative part of the GSE portfolios. The higher revenues
not only compensate for any additional risk, but also allow for
cross-subsidizing other purchases. Also, investor ownership of rental units in
one-to-four family properties accounts for half of all rental units, and
perhaps a larger share of those rented by low- and moderate income families.
Placing limitations on the market, UI maintains, reduces the resources by which
the GSEs can cut the cost of borrowing
for underserved communities. Our summary of the UI critique can be read here.
above policies will be effective for whole loans submitted to Fannie Mae on or
after April 1, 2021 and for loans delivered into mortgage backed security pools
with issue dates on or after that date. The company said that due to the need
to comply with these restrictions in PSPA, it we will be monitoring deliveries
of second home and investor loans on a lender-level basis and will be working
with lenders that have excessive delivery volume of these types of loans.
company says it will update its Selling
Guide and Eligibility Matrix to reflect the changes next month. MND
expects a letter announcing similar if not identical changes will be
forthcoming from Freddie Mac.