Fannie Mae-No Politics (FNMA)

[navycmdr]

Surprise: PSPA Limits on Investment Loans Go Into Effect in April

Fri Mar 12, 2021 - [e-mail]



Fannie Mae midweek released a lender letter intended to clarify new rules for the purchase of mortgages backed by second home or investment properties.

The guidelines stem from amendments to the preferred stock purchase agreements between Treasury and Fannie Mae and Freddie Mac. Among the changes to the PSPA were several new restrictions on the GSEs’ acquisition of certain types of loans. (The alterations were requested by Treasury as a way to limit its exposure to what it perceived to be risky behavior.)

For example, the updated PSPA specifically limits the amount of risk-layering allowed in a GSE’s acquisitions. No more than 3% of the single-family refinance loans purchased by Fannie or Freddie can have any two of the following criteria: loan-to-value ratios exceeding 90%, debt-to-income ratios over 45%, or a FICO score below 680. Likewise, only 6% of purchase loans can exceed these limits.

But the rule change that has generated the most confusion is one that limits acquisitions of loans secured by investment properties or second homes. One bugaboo: the start date.