When you have a borrower that has taken rental properties a little more serious the average rental investor and has multiple rental properties, how many will FHLMC finance? Recent selling guide updates announced on March 16, 2017 (Bulletin 2017-2) provided some immediate clarification to this question.
By now we are all familiar with the change in 2016 when FHLMC raised their guidelines from a maximum number of four financed properties, up to six financed properties when the subject property is either a second home or investment property transaction. Note that there is no maximum when the subject is a primary residence. This was good news for those investors looking to grow their portfolio without looking for much more expensive private financing to purchase additional investment properties.
Which financed properties count and which do not?
But even with the new raised limits there was some confusion on how to properly determine which properties counted in the six. For instance, some underwriters would consider any property that you held title on that was financed, even if you did not sign on the mortgage. Examples of this would be properties financed by the spouse or in a business. In bulletin 2017-2 FHLMC clarified what properties do and do not count in this total. Here is a summary of the new clarification.
FHLMC 4201.15 & 4201.16
Each Borrower individually and all Borrowers collectively must not be obligated on (e.g., Notes, land contracts and/or any other debt or obligation) more than (6) six, 1-4 unit financed properties, including the subject property and the Borrower’s Primary Residence.
Examples of financed properties that do not have to be counted in this limitation include:
- Commercial real estate
- Multifamily (five or more units) real estate
- Undeveloped land
Manufactured homes not titled as real property (chattel lien), unless the property is situated on the land that is titled as real property
Property titled in the name of the Borrower’s business provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property (New with Bulletin 2017-2)
Property titled in the name of a trust where the Borrower is a trustee, provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property (New with Bulletin 2017-2)
For 2017 with the predication of lower refinances and more of a focus on purchase business, this information should give you a few more leads to call on to see who is in the market for a new rental property!