Fannie and Freddie End Funding of Single-Family Rentals

Fannie and Freddie End Funding of Single-Family Rentals

Bajak and Associates

The Federal Housing Finance Agency (FHFA) has pulled the plug on pilot programs run by both Fannie Mae and Freddie Mac (the GSEs) to finance institutional investment in single-family home rentals.  The programs began in February 2017 with a $1 billion loan from Fannie Mae to the Blackstone Group. The loan was originated by Wells Fargo with a Fannie Mae guarantee and secured by some of the 48,000 single-family homes Blackstone's Invitation Homes subsidiary had purchased during the recession, often from portfolios of lender-owned real estate, and turned into rentals.

At the time, the Urban Institute wrote that the transaction "marks the first time a government-sponsored enterprise has facilitated financing for a large institutional operator of single-family rental properties," and Fannie Mae pronounced the transaction the first in a pilot program.

In ending the program FHFA said, "In the last two years, both Enterprises have participated in the single-family rental market on a larger scale than previously through pilots designed to 'test and learn' more about the market and best practices.  In June 2017 FHFA convened a Single-Family Rental Workshop to solicit feedback, identify market challenges and opportunities, and gain perspective on the overall market.  It also conducted an impact analysis and reached out to a wide array of industry stakeholders.    

When the pilot began it provoked immediate blowback, especially from the National Association of Realtors® (NAR).  NAR's president at the time, William E. Brown, wrote a letter to FHFA director Mel Watt which said in part, "Rather than focusing on allowing well-qualified Americans to build wealth through affordable mortgage options, Fannie Mae is actively financing large institutions to compete with them. These investors do not expand the affordable housing stock. Rather, in this limited market they drive up the price of rents and remove affordable inventory from the hands of American homeowners."

The National Community Stabilization Trust (NCST) also denounced the program saying it would lower borrowing costs to the institutions, allowing them to buy up more housing stock. NCST president Robert Grossinger said, "I am perplexed to see Fannie Mae place a taxpayer guarantee behind the same private interests whose risky practices led to the millions of foreclosed homes they are now buying up. These investors so far have had no trouble financing the purchase of tens of thousands of homes without government support."

With this week's announcement FHFA appears to agree with Grossinger.  Watt said, "What we learned as a result of the pilots is that the larger single-family rental investor market continues to perform successfully without the liquidity provided by the Enterprises."

This will mark the end, FHFA said of the GSE's participation in the single-family rental market except through their previously existing investor programs. The GSEs are not precluded however from proposing changes to their existing programs to meet the needs of the single-family rental market. They are also free to develop proposals calculated to utilize single-family rentals as a pathway to homeownership.

Not surprisingly NAR applauded FHFA's decision. NAR president, Elizabeth Mendenhall, issued a statement that said in part, "With inventory shortages facing housing markets across the country, the National Association of Realtors® has long advocated for the Federal Housing Finance Agency to end its expansion into the single-family rental market and return its focus to promoting a liquid and efficient housing market, as Congress intended. By financing the purchase of thousands of single-family homes for institutional investors to use as rentals, Fannie Mae and Freddie Mac compounded on inventory shortages and affordability concerns, which are holding back prospective homebuyers across the country.

Like us on Facebook

Article Source: Jann Swanson, Mortgage News Daily

Garage Conversion Restrictions Eased In California

Garage Conversion Restrictions Eased In California!

Bajak and Associates

Real Estate Garage Conversion

Amid a profound housing shortage that’s driving up rents and property values statewide, California officials and real estate experts are looking to an often overlooked form of housing as a potential solution: the in-law unit.

Thousands of Angelenos already live in back houses and granny flats (officially called “accessory dwelling units”). This year has seen a substantial increase in these garage conversion units, due to California’s new Senate Bill 1069.  The bill, enacted in 2017, was designed to increase housing supply by easing restrictions on garage conversion units.  The bill also presents an opportunity for homeowners to increase their home value by adding liveable space to their home without dealing with the previously stringent permitting process.

Prior to the enactment of SB 1069, a garage conversion, particularly in Los Angeles, was time consuming and expensive.  Among other things, in order to convert a garage to living space, many cities required the addition of replacement parking spaces, large pathways from the garage conversion to the street, a sprinkler system for the new unit, and fees and charges to connect local water and sewer systems even for existing structures.  In fact, the permitting system in Los Angeles prior to SB 1069 was so complex that in 2016, the Los Angeles Superior Court had put a hold on garage conversion permits due to a conflict between state law and local rules.

SB 1069 encourages garage conversion units by eliminating many of these requirements and simplifying the permitting process.  Now, so long as a property is within 1.5 miles of a public transit system, a permit can more easily be obtained for a garage conversion of up to 1,200 square feet that starts within 5 feet of the property line.  This streamlined procedure has significantly increased the popularity of garage conversions, and has provided a new avenue for homeowners to add an easy source of rental income and low-cost housing opportunity for renters. These small residences could help solve California’s housing shortage, and is certainly a step in the right direction.

If you would like to explore how we can help you and your family finance your garage conversion project in the Los Angeles real estate market, give us a call today at 1-800-217-1152 for a FREE consultation or send us an email at BajakTeam@Gmail.com

Like us on Facebook

5 Mortifying Reasons Mortgage Applications End Up in the 'Reject' Pile

5 Mortifying Reasons Mortgage Applications 

End Up in the 'Reject' Pile

Bajak and Associates

Picture this nightmare: You apply for a mortgage, but your application gets rejected. Suddenly, you’re hit with an overwhelming wave of embarrassment, shock, and horror. It’s like having your credit card denied at the Shoprite. So. Much. Shame.

Sadly, this is a reality for some home buyers. According to a recent Federal Reserve study, one out of every eight home loan applications (12%) ends in a rejection.

There are a number of reasons mortgage applications get denied‚ and the saddest part is that many could have been avoided quite easily, had only the applicants known certain things were no-nos. So, before you're the next home buyer who gets burned by sheer ignorance, scan this list, and make sure you aren't making any of these five grave mistakes, which could land your mortgage application in the "no" pile.

1. You didn't use credit cards enough

Some people think credit card debt is the kiss of death ... but guess what? It's also a way to establish a credit history that shows you've got a solid track record paying off past debts.

While a poor credit history riddled with late payments can certainly call your application into question, it's just as bad, and perhaps worse, to have little or no credit history at all. Most lenders are reluctant to fork over money to individuals without substantial credit history. It's as if you're a ghost: Who's to say you won't disappear?

According to a recent report by the Consumer Financial Protection Bureau, roughly 45 million Americans are characterized as "credit invisible”—which means they don't have a credit report on file with the three major credit bureaus (Equifax, Experian, and TransUnion).

There’s a silver lining, though, for those who don’t have credit established. Some lenders will use alternative data, such as rent payments, cellphone bills, and school tuition, to assess your credit worthiness, says Staci Titsworth, a regional manager at PNC Mortgage in Pittsburgh.

2. You opened new credit cards recently

That Macy’s credit card you signed up for last month? Bad idea. New credit card applications can ding your credit score by up to five points, says Beverly Harzog, a consumer credit expert and author of “The Debt Escape Plan.”

That hit might seem minuscule, but if you’re on the cusp of qualifying for a mortgage, your new credit card could cause your loan application to be denied by a lender. So, the lesson is simple: Don’t open new credit cards right before you apply for a mortgage—and, even if your lender says things look good, don't open any new cards or spend oodles of money (on, say, furniture) until after you've moved in. After all, lenders can yank your loan up until the last minute if they suspect anything fishy, and hey, better safe than sorry.

3. You missed a medical bill

Credit cards aren't the only debt that count with a mortgage application—unpaid medical bills matter, too. When you default on medical bills, your doctor’s office or hospital is likely to outsource it to a debt collection agency, says independent credit expert John Ulzheimer. The debt collector may then decide to notify the credit bureaus that you’re overdue on your medical payments, which would place a black mark on your credit report. That’s a red flag to mortgage lenders.

If you can pay off your medical debt in full, do it. Can’t foot the bill? Many doctors and hospitals will work with you to create a payment plan, says Gerri Detweiler, head of market education at Nav.com, which helps small-business owners manage their credit. Showing a mortgage lender that you’re working to repay the debt could strengthen your application.

4. You changed jobs

So you changed jobs recently—so what? Problem is, mortgage lenders like to see at least two years of consistent income history when approving a loan. As a result, changing jobs shortly before you apply for a mortgage can hurt your application.

Of course, you don’t always have control over your employment. For instance, if you were recently laid off by your employer, finding a new job would certainly be more important than buying a house. But if you’re gainfully employed and just considering changing jobs, you’ll want to wait until after you close on a house so that your mortgage gets approved.

5. You lied on your loan application

This one seems painfully obvious, but let's face it—while it may be tempting to think that lenders don't know everything about you financially, they really do their homework well! So no matter what, be honest with your lender—or there could be serious repercussions. Exaggerating or lying about your income on a mortgage application, or including any other other untruths, can be a federal offense. It’s called mortgage fraud, and it’s not something you want on your record.

Bottom line? With mortgages, honesty really is the best policy.


Like us on Facebook

Image Source: Peter Dazeley/Getty Images

Article Source: Daniel Bortz, Realtor.com