The GSE Loan Cap And How It Affects Loans For Investment Properties and Second Home Purchases

Recently, the Federal Housing and Finance Agency limited government sponsored enterprises (GSE) Fannie Mae and Freddie Mac to a 7% cap on loan purchases for investment properties and second homes. This means that lenders who sell these types of loans to Fannie Mae and Freddie Mac will be subject to restrictions if their volume exceeds 7%. This could present a challenge for people looking to purchase investment properties or second homes. Below we have addressed answers to questions we have received surrounding the restrictions:

How does this impact lenders?
 It could pose a real challenge. Real estate investors see a significant opportunity in the single-family rental space. Due to tight inventory and increased competition, investors need to close on loans quickly. They need a go-to lender who can get it done. This is a new environment of managing specific loan volume within the overall Agency production, now and going forward. The options for lenders and their real estate investor clients get smaller trying to find someone to do these loans. Along with the cap, guidelines are tightening for these loans, making alternative loan solutions––such as non-QM––a must-have loan offering outside of Agency. Without non-QM, many homebuyers cannot qualify for a home purchase due to stricter guidelines from Fannie and Freddie.

 

Are there lenders not subject to the limit? Yes, and Angel Oak Home Loans is one of them. Our loans are backed by private capital through our affiliate Angel Oak Capital Advisors and we are not held to limits set forth by the FHFA. This allows us to continue to support real estate investor clients and those purchasing second homes without any restrictions. It is business as usual for us when it comes to second home and investment loans. We have Agency options, and when that won’t work, we can pivot quickly to a non-QM product without a delay for a quick close.

What are solutions outside of Agency or traditional loans? 
Angel Oak Home Loans offers several non-QM loan options to purchase second homes and investment properties. Our Investor Cash Flow loan is an easy loan for real estate investors not wanting to use tax returns or income. This loan qualifies using the cash flow of the property. A Bank Statement loan allows bank statement submissions instead of tax returns. Full doc options include Platinum Jumbo and Portfolio Select. Portfolio Select is a good option for those just one year out of foreclosure and two years out of short sale, bankruptcy or deed-in-lieu.

Find a non-QM partner:
Angel Oak Home Loans not only has the product options to help but also many other resources for support. Homebuyers needing investment and second home loans doesn’t have to be a challenge with the right lender helping you. We can help educate Realtors and consumers so that it is understood that the FHFA cap is not a risk aversion but a decision to simply better manage a disproportionate focus on investor loans. Let us educate you on how non-QM is beneficial in today’s market. We have presentations and innovative products ready for Realtors and their team. We will schedule a meeting or webinar anytime for you or your clients. Angel Oak Home Loans Is Your Full-Service Lender For ALL Mortgage Needs With NO Restrictions From Fannie Mae OR Freddie Mac.