Fannie Mae has specific requirements for multiple financed properties: If subject loan is owner occupied, Fannie Mae has no limit on number of properties financed If subject is second home or investment and borrower has 1-4 financed properties, there are no restrictions however manual reserve calculation required If subject is second home or investment and borrower has 5-10 financed properties, specific eligibility requirements apply including but not limited to manual calculation of reserves
The limitations apply to the total number of properties financed, not to mortgage obligations Limitations vary based on type of property ownership Any percent of either ownership or obligation on a financed property is considered ownership Properties held by a LLC are included as they are considered personal ownership The following types of ownership are excluded: Ownership of vacant residential lot Commercial real estate ownership Ownership in timeshare or multi-family dwelling consisting of more than 4 units Property held in corporation where loan is in name of corporation (cannot exclude if loan in name of borrower)
DU engine does not properly apply the eligibility requirements to borrowers with multiple financed properties for a loan on a second home or investment property DU cannot determine the number of financed properties As such, all eligibility criteria must be manually applied on these transactions Cannot rely on a DU Approve/Eligible-must manually review for eligibility
DU comes back with specific wording. The responsibility lies with the Underwriter to review the transaction manually for eligibility: Verify the number of properties being financed. If the borrower will own 1 to 4 financed properties, the lender must verify that the borrower meets the reserve requirements for investment or second home transactions as specified in the Selling Guide. If the borrower will own more than 4 financed properties, the loan case file must comply with the eligibility, underwriting, and delivery requirements specified in the Selling Guide; Cash-out refinance transactions are not eligible if the borrower will own more than 4 financed properties, unless the loan meets the cash-out exception for delayed financing. If the borrower will own more than 10 financed properties, the loan is ineligible for delivery to Fannie Mae.
Second home or investment subject loan where borrower owns 5-10 financed properties must meet following additional eligibility criteria Minimum FICO 720 See matrix for LTV restrictions; special guidance applies to ARM s Manual calculation of reserves - 6 month PITIA reserves required on each financed second home or investment property owned
If subject is second home or investment, with borrower owning more than 4 financed properties, cannot cash-out unless delayed financing exception met DU alerts the Underwriter with the messaging below: If the borrower will own more than 4 financed properties, the loan case file must comply with the eligibility, underwriting, and delivery requirements specified in the Selling Guide; Cash-out refinance transactions are not eligible if the borrower will own more than 4 financed properties, unless the loan meets the cash-out exception for delayed financing.
To meet the requirements of Delayed Financing Exception, financing could not have been used for the original purchase transaction and all of the following must be met: New loan amount cannot exceed borrowers initial documented investment to purchase (see matrix for additional details) Purchase transaction was arms-length transaction HUD-1 from original transaction required Title evidences no liens on subject
Source of funds used to purchase property can be documented to confirm they were borrower s own funds Including Earnest Money Deposit Gift funds are non-reimbursable If the source was a HELOC secured on another property, the HUD1 must reflect this HELOC being paid off from proceeds of new cashout transaction Property was purchased within the previous 6 months Purchase date to disbursement date of new loan
Manual Reserve Calculations required if subject second home or investment with financed properties follow: 1-4 Financed Properties: Additional reserves are 2 months for each financed second home or investment property 5-10 Financed Properties: Additional reserves are 6 months for each financed second home or investment property
Follow the below guidance when entering reserves in DU for multiple financed properties: Subtract the amount of the required reserves for the financed properties, other than the subject property, from the borrower s liquid assets Enter only the remaining assets in DU Verify and document the assets necessary to meet the reserve requirements for the financed properties Verify and document the assets entered in DU as per the DU Findings report
Planet Home Lending limits the number of properties financed by Planet Home Lending to a maximum of 4 There is no dollar exposure limit