Fannie Mae has changed the underwriting guidelines for investors who own more the 4 financed properties.  The big changes are in bold and I have described the difference with an example of the difference in calculation.

  1. A financed property has been redefined as a residential 1-to 4-unit property with a mortgage for which the borrower is personally obligated. This means that if a borrower took out financing in the name of the LLC as a borrower or a partnership or some other entity then the loan will not be counted as a loan that requires reserves. Fannie Mae used to count all 1-4 unit financed properties in the count regardless of who the borrower on the loan was.  This is great news for investors!
  2. The reserve calculation has been redefined for the other financed properties and will now be determined by applying a specific percentage based on the number of financed properties to the aggregate of the outstanding unpaid principal balance (UPB) for all mortgages and HELOCs.

*2% of the aggregate UPB if the borrower has 1 to 4 financed properties.
*4% of the aggregate UPB if the borrower has 5 to 6 financed properties.
*6% of the aggregate UPB if the borrower has 7 or more financed properties.

It used to be that a property where you owed $84,000 and had a PITI of $700 would have required 12 months of that PITI in reserves.

If your investor already had 6 properties where she owed $840,000 and a piti of $700 per month
then she would have needed $50,400 versus now you would need 4% of the aggregate of the loans
or $84,000 x 6 x 4% =  $20,160  = much easier! $20,160 VS $50,400