Are you in the market for an investment property or second home purchase?
Now is the time to act! The policies set in place by the Federal Housing Finance Agency (FHFA) earlier this year, which led to increased fees and rates, have been put on hold.
Preferred Stock Purchase Agreement: IMPLMENETED APRIL 2021
In January, the FHFA implemented the 2021 Preferred Stock Purchase Agreement (PSPA). Within it was a rule limiting secondary and investment home loans to only 7% of Fannie Mae and Freddie Mac’s loan portfolio. This blog from March provides the details but in summary, the implementation of this limit meant that lenders would take on an increased risk on secondary and investment loans. It was less likely they could sell them on the secondary market, so they may have had to retain the loans. Since this policy was enacted, borrowers experienced higher fees, higher interest rates, increased down payment requirements, and a more challenging qualification process on these types of mortgages.
Preferred Stock Purchase Agreement: SUSPENDED SEPTEMBER 2021
Earlier this month, the FHFA suspended certain provisions of the PSPA for review and revision, to include the 7% limit. This is great news for those looking to purchase a property of this type. Pausing this policy and the 7% loan portfolio limit decreases lender risk. Decreased risk equates to lower fees onto secondary and investment property mortgages.
In time, this policy pause will likely lead lenders to ramp their volume back up and incentivize investors with lower interest rates. The effects may vary throughout the industry as lenders determine their path forward in this new, less-risky environment.
The Impact: FEES and INTEREST RATES REDUCED OR REMOVED
More good news! Simplicity Mortgage is pleased to offer these loan products with none of the additional fees to secondary and investment property loans associated with the 7% limit imposed earlier this year. Whether you are looking to purchase a vacation home or start earning passive income through an investment property - we are here to help. With our portfolio of over 15 different lenders, we've got an excellent option for you!
Potential Savings: SIGNIFICANT
Some lenders had implemented a 2.25% fee, so with that removed, potential savings would equate to $6,750 on a $300,000 loan. This means big savings in closing costs for those purchasing a non-primary home!
Time to Buy: NOW
If you have been in the market for a secondary, vacation or investment property, now is an excellent opportunity to make your purchase. Take advantage of reduced fees and enjoy your savings at the closing table and for years to come.
Takeaway: DON'T DELAY!
Currently, the removal of the 7% limit created by the PSPA is not permanent, it has been put on pause while they review and revise it. Based on findings, they could update the PSPA or portions of it, which may result in a different outcome at a later time.
Inventory is on the rise and interest rates are still at all time lows!
Call Simplicity Mortgage today to discuss your options!
*Each property, purchase, and borrower is unique. Our experienced team will discuss your specific circumstances and evaluate how this policy change impacts your purchase. We will provide all applicable loan product options, based on your individual financial scenario, so that you may successfully achieve your homeownership goals.