Housing News

Fannie Mae, Freddie Mac Remove Limits on Second Homes, Investment Properties

Earlier this year, Fannie Mae and Freddie Mac enacted new policies that limited the number of second home and investment property mortgages each of the companies could acquire as part of a government effort to allow the companies to retain more capital. Those limits are now no more.

The Federal Housing Finance Agency (the government agency that regulates Fannie Mae and Freddie Mac) announced earlier this month that it is suspending several of the new policy changes put in place in January that altered how Fannie and Freddie do business.

One of the policies that is being suspended is the cap on how many second home and investment property mortgages Fannie and Freddie could acquire, meaning each of the GSEs can now return to acquiring these mortgages as they did before the rule changes took effect.

The previous rules limited Fannie and Freddie's purchase of second home and investment property mortgages to 7% of their total acquisitions.

Those limits are now a thing of the past, with both Fannie and Freddie announcing that they were repealing their caps on these properties per the FHFA's direction.

"This suspension will provide FHFA time to review the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies, and directives that mandate sustainable lending standards," FHFA Acting Director Sandra Thompson said of the rule changes.

In their announcements, both Fannie and Freddie said the suspension of the cap is effective in September, meaning lenders can immediately resume selling second home and investment property mortgages as they were previous to the cap being put in place.

"The suspension allows you to continue reaching more borrowers and expanding affordable rental housing by providing investor property financing in underserved communities," Freddie Mac said in an email to lenders. "Working with you and other stakeholders, we strive to provide liquidity, stability and affordability in the housing market."

Beyond the changes to the investment property rules, the FHFA also suspended several other policies, including "limits on the Enterprises' cash windows (loans acquired for cash consideration)," multifamily lending, and loans with "higher risk characteristics."

The changes were celebrated by both the Mortgage Bankers Association and the National Association of Realtors.

"MBA applauds the announcement by the Treasury and FHFA that they are suspending the limits on purchases of certain loan types, lenders' use of the cash window, and multifamily volumes, which were imposed on the GSEs by the PSPA amendments on Jan 14, 2021," MBA President and CEO Robert Broeksmit said in a statement.

"The suspensions will eliminate several market and pricing disruptions caused by these caps that were harming lenders and borrowers alike and pave the way to restore appropriate regulatory authority to the FHFA," Broeksmit continued. "MBA looks forward to working with Treasury, FHFA, and all other stakeholders on these and other ways to protect consumers and strengthen the mortgage market."

Those sentiments were shared by NAR President Charlie Oppler.

"NAR applauds the Federal Housing Finance Agency and Treasury's action to suspend implementation of several components of the January amendments to the Preferred Stock Purchase Agreements," Oppler said in a statement. "NAR has continuously urged the administration since January to delay these amendments, voicing our concern loud and clear that such changes would limit the Enterprises' ability to appropriately serve the overall U.S. housing market as intended in crisis as well as first-time buyers, those in underserved communities, investor properties and second home purchases."