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New Fannie Mae Reserve Requirements for Investors With Multiple Properties Owned


 

American dollars image, which is the key with remote control in the form of the house, represents the purchase or sale real estate and housing

There are many investors that still do not know that Fannie Mae is requiring additional reserves from borrower’s that have more than one financed property.

The Old requirements was 6 months Principle, Interest, Taxes and Insurance (PITI)on the subject property and 2 on all other properties up to 4 leveraged 1 – 4 family properties excluding the primary residence. Properties 5 – 10 would require 6 month PITI on all properties.

The New requirements are based on a percentage of the unpaid principal balance on each loan excluding the primary residence.

If a borrower has 2-4 financed properties, the reserves of 2% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.

Occupancy Outstanding UPB Monthly PITIA Reserves Calculations
Subject: Second Home $78,750 $776 2 Months PITIA $1,552
Principle Residence $0 $179 N/A $0
Investment Property $87,550 $787 2% of UPB $1,751
Investment Property $142,500 $905 2% of UPB $2,910
Total Balances $230,050 Total Reserves Required $6,153

If a borrower has 5 – 6 financed properties, 4% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.

Occupancy Outstanding UPB Monthly PITIA Reserves Calculations
Subject: Investment $78,750 $776 6 Months PITIA $4,656
Principle Residence $0 $946 N/A $0
Investment Property $87,550 $787 4% of UPB $3,502
Investment Property $142,500 $905 4% of UPB $5,700
Investment Property $84,950 $722 4% of UPB $3,398
Investment Property $30,030 $412 4% of UPB $1,201
Total Balances $345,030 Total Reserves Required $18,457

If a borrower has 7 to 10 financed properties, 6% of the unpaid principal mortgage balances are required, excluding the principal residence and the subject property.

Occupancy Outstanding UPB Monthly PITIA Reserves Calculations
Subject: Investment $78,750 $776 6 Months PITIA $4,656
Principle Residence $0 $179 N/A $0
Investment Property $87,550 $787 6% of UPB $5,253
Investment Property $142,500 $905 6% of UPB $8,550
Investment Property $84,950 $787 6% of UPB $5,097
Investment Property $30,300 $412 6% of UPB $1,801
Second Home $124,500 $837 6% of UPB $7,470
Investment Property $160,000 $1,283 6% of UPB $9,600
Total Balances $629,530 Total Reserves Required $42,427

The aggregate UPB calculation does not include the mortgages and HELOCs that are on

  • the subject property,
  • the borrower’s principal residence,
  • properties that are sold or pending sale, and
  • accounts that will be paid by closing.

The subject property will still have monthly reserve requirements based on the total mortgage payment (PITI). Reserves are funds are funds that you have access to liquid or non-liquid.  Reserves are funds you need to have after the closing your transaction. Funds for reserves cannot be your funds for down payment or closing cost.

Good News

Non-Liquid funds can be used for reserve requirements”

  • IRA’s
  • 401K’s
  • SEP Funds

Fannie Mae now will allow for 100% of the Non-Liquid funds, not 60%

Freddie Mac currently has different guidelines than Fannie Mae.

 


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