Good news for second-home buyers: Certain loan restrictions at the federal level have been lifted, which will make it easier to get a mortgage for those properties.
In an effort to boost housing supply, the Treasury Department and Federal Housing Finance Agency are removing some rules that limited the number of loans that Fannie Mae and Freddie Mac could buy, HousingWire reported.
The restrictions, which were added to the Preferred Stock Purchase Agreements in January, prevented Fannie Mae from acquiring loans secured by second homes and investment properties. Lenders are more hesitant to make loans that cannot be sold to Fannie and Freddie, and loans that are off limits to the government-sponsored entities are typically more expensive for borrowers.
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Under the January change, only 7 percent of the agency’s total single-family acquisitions could be from loans secured by second homes and investment properties. Other restrictions included those on higher-risk loans and small lender cash window access.
With home prices on the rise and few homes on the market, dropping these restrictions is a way to promote sustainable homeownership, the Treasury Department said in a statement.
“The administration is focused on promoting housing stability, which includes advancing housing policies that can sustainably increase the stock of affordable housing units for rent and ownership,” the statement continued.
When the restrictions were implemented, they were met with outcry from lenders and trade groups, who complained that the limits on the cash window would force lenders to send mortgage-backed securities to the private market, the publication reported. By spring, demand for those properties had risen by 84 percent over the past year, according to a report from Redfin.
The rollback was met with positive reactions from groups including the Community Home Lenders Association, which commended FHFA director Sandra Thompson for the reversal.
[HW] — Cordilia James