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Old 11-09-2008, 08:45 PM
 
2 posts, read 6,562 times
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Currently I own 4 rental duplexes and with the new lending restrictions I am only able to borrow on 4 properties. I would like to continue buying duplexes and have plenty of equity to do so. Is it possible to obtain commercial lending for multi-family properties below 5 units? It was mentioned to me a while back that it may be possible if I rolled 4 properties into the same loan thus treating it as an 8 unit property.
Any ideas on how this could be possible and lenders who may be willing to make this work would be appreciated.
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Old 11-10-2008, 11:30 AM
 
Location: New York
2,251 posts, read 4,163,764 times
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Hey Chris

My 2 cents on your situation. I worked doing mortgages since 2001. I remember one borrower that had 23 rental properties (2 to 4 family).

The restriction on the number of homes a borrower can own is 4 to 5 homes (depending on the lender). Commercial loans do not have these types of conditions. This is why the interest rates are much higher.

How did she do? Through her attorney they transferred the titles to her corporation.

..
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Old 11-10-2008, 12:11 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,595,489 times
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the restrictions on 4 or 5 homes is the limit you can have financed through that particular lender.
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Old 11-10-2008, 01:18 PM
 
Location: Laguna Niguel, CA
768 posts, read 3,959,578 times
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For the subject property is a second home or investment property, Freddie Mac limits the max # of financed properties to 4 now.

http://www.freddiemac.com/sell/guide.../bll042208.pdf

Here is Fannie Mae's policy which doesn't start until 12/1/08, but lenders already started implementing it a couple months ago:

Multiple Mortgages to the Same Borrower
Selling Guide, Part VII, Section 101.05: Multiple Mortgages to the Same Borrower
When a conforming mortgage loan is secured by the borrower’s principal residence, there is no limitation on the number of one-to-four unit financed properties in which the borrower may have an individual or joint ownership interest. If the conforming mortgage will be secured by a second home or investment property, the borrower is currently limited to no more than ten financed properties in accordance with the Selling Guide.
Fannie Mae is updating the guidelines to limit the number of financed properties to four when the mortgage being delivered to Fannie Mae is secured by a second home or investment property. This applies to mortgage loans that are manually underwritten and loan casefiles underwritten through DU. This update does not apply to the existing guidelines for HomeStyle renovation mortgages (Selling Guide, Part VII, Section 117) or Community Living® mortgage loans (Selling Guide, Part IX, Section 301.02). As a
Announcement 08-22 Page 7
reminder, jumbo-conforming mortgage loans are currently limited to four financed properties, including principal residences, second homes and investment properties.
In addition, Fannie Mae is clarifying that it does not consider the borrower to have either joint or total ownership in a property that is held in the name of a corporation, even if the borrower is the owner of the corporation. Such properties are not counted towards the four financed property limit.
Effective Date
The current DU message that is issued when the borrower appears to have more than ten financed properties will be updated in a future release to reflect this updated policy.
Lenders are encouraged to implement these guidelines immediately. All whole mortgage loans purchased by Fannie Mae on or after December 1, 2008, and mortgage loans delivered into MBS with issue dates on or after December 1, 2008 must comply with the new policy.
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Old 11-10-2008, 01:24 PM
 
Location: Laguna Niguel, CA
768 posts, read 3,959,578 times
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Quote:
Originally Posted by chrisanderson9889 View Post
Currently I own 4 rental duplexes and with the new lending restrictions I am only able to borrow on 4 properties. I would like to continue buying duplexes and have plenty of equity to do so. Is it possible to obtain commercial lending for multi-family properties below 5 units? It was mentioned to me a while back that it may be possible if I rolled 4 properties into the same loan thus treating it as an 8 unit property.
Any ideas on how this could be possible and lenders who may be willing to make this work would be appreciated.
Awhile back I looked into financing 2-4 unit properties in the Atlanta area as commercial, after calling about 20 different banks, from big banks like SunTrust & Wachovia, to small community banks, I determined that no one was interested. Not saying that all banks would think the same way, but for this particular situation it didn't seem possible.

If you wanted to continue using residential financing you would have to contact a lender who offers "portfolio" loan programs and wouldn't be selling the mortgage off in the secondary market. These types of lenders aren't too common, but if you look hard enough you can find them.
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Old 11-10-2008, 03:56 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,595,489 times
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what you want is an Alt A financing, a portfolio loan, that's all.
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Old 11-10-2008, 04:36 PM
 
Location: West Milford, NJ
37 posts, read 112,313 times
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As noted above, you need to shop around and find a portfolio mortgage lender, one that uses its own money and has its own guidelines. The SECONDARY market mortgages pretty much have the same guideline at a maximum of 4 mortgages. Most portfoilio lenders have same guidelines as SECONDARY market mortgages but you may be able to find one that does not have the restriction on number of mortgages. In New Jersey we have at least one portfoilio lender who permits over 4 mortgages, but, the catch is one may not use rental from the subject property to qualify. Probabaly others I do not know about.
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Old 11-10-2008, 04:52 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,595,489 times
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i have also heard lately that SBA Loans have been picking up the slack, as well.
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Old 11-10-2008, 05:22 PM
 
Location: MID ATLANTIC
7,602 posts, read 17,634,581 times
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Quote:
Originally Posted by JohnVeenstra View Post
As noted above, you need to shop around and find a portfolio mortgage lender, one that uses its own money and has its own guidelines. The SECONDARY market mortgages pretty much have the same guideline at a maximum of 4 mortgages. Most portfoilio lenders have same guidelines as SECONDARY market mortgages but you may be able to find one that does not have the restriction on number of mortgages. In New Jersey we have at least one portfoilio lender who permits over 4 mortgages, but, the catch is one may not use rental from the subject property to qualify. Probabaly others I do not know about.

Ding, ding, ding!!! Give the man a gold ring.......Portfolio is the answer. On our portfolio products, we allow up to 12 properties, but no more than 1.5M to be financed with us at any one time. If you have a ton of rentals and suddenly want a second home, we will only do that as an investor - we aren't even going to pretend that you are buying a 2nd home (even if it really is). We have our quirks too. Unfortunately, we don't go to the OP's zip code, but there are lenders nationwide that do. As for how to find such a lender, that's a tough one. My bank use to work with other brokers and lending institutions, but packed up our toys and took them home (along w/ everyone else) when trouble was knocking on everyone's door.

Some banks will allow you to put investment properties in a "closely held corporation," but not an LLC, which is Limited Liability Corporation. Lenders don't want to loan someone that has no liability and I have yet to run across a mortgage lender that will accept title in the name of an LLC. Usually closely held corporations are a family joint venture and will allow the majority stock holder to sign as personal guarantor.

(This post reminds me of another rant.....I miss the old fashioned yellow pages. Come to think of it, the white pages, too. This is one area I think the original was more user friendly. But this is a perfect example for the OP to initiate a search. Am I crazy?)
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