In addition, Fannie Mae is putting in place policies to monitor and then pursue borrows who are in default. This was stated in the announcement – “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.” 

So what option does an owner who needs to sell but can’t have? They are going to think long and hard about the ramifications of their decisions. If they can work with their mortgage holders through a loan modification, a short sale, or even deed-in-lieu, they may be able to reduce the time down to three years instead of seven.   

The question then becomes how does Fannie Mae determine who has the capacity to pay? It will be interesting to see how this plays out in the marketplace over the next couple of years. I would be interested to know your thoughts on this new development and how you think it will impact the current housing crises, so add a comment and I will publish them. 

To read the full announcement, you can go to Fannie Mae’s site.

Under the new guidelines – while Fannie Mae will continue to permit up to 75% of rental income to offset the mortgage payment, owners will now have to have 30% equity in the existing property. Equity will be derived from an appraisal, AVM, or BPO less any outstanding liens. Rental income will need to be fully documented with an executed lease agreement & a deposit confirmation.

If the 30% equity in the property cannot be documented, then the rental income can not be used to offset the mortgage payment. Therefore, the borrow will need to have a high enough income to qualify for both homes. In addition the borrower will have to have 6 months of reserves for both properties.

You can read more of the specifcs about these changes at  – https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf

All of this will have a significant impact of the investing community. It has already gotten more challenging with the removal of stated income loans – but this will have far reaching effects not only for investors, but for Middle America. As the home sales continue to lag- people that need to move for a job, or to be closer to a family member now will not be able to purchase a new home until their other home sells. This may end up crippling to our economy.

As a real estate professional. it is our duty to understand and advise our clients about options that are available to them. In the past putting a property in rental services was a viable option – now it is more limiting than just selling the property.

We encourage you to read through the new guidelines to become more educated.

Some of the benefits of a 1031 Exchange that we talked about were:

Tax Savings: A 1031 exchange allows you to exchange your property for another and defer the payment of federal and state capital gains taxes. This basically allows you to reinvest the taxes you owe as an interest-free, no-term loan from the government.

Income: If you exchange from a non-producing or low producing property into an income producing property.

Leverage: The 1031 exchange helps build wealth more rapidly by allowing you to use all of your equity rather than losing a portion through taxes.

Diversification: A 1031 exchange opens doors for diversification. One can achieve geographical diversity or diversification by acquiring a different property type such as exchanging a single family residential unit for a commercial property.

Management Relief: Many investors often start investing through purchasing single family residences. As a result, they accumulate several smaller properties and may find themselves in a management-intensive and time consuming situation. The 1031 exchange provides a solution to this by allowing you to exchange these smaller properties for one larger property.

It was a great show and provided a lot of insight for our listeners on how they may be able to leverage their existing inventory into bigger deals. As we shared, there has never been a better time to get involved in rental real estate.

Tune in next week to www.NewsTalkRadio1160.com Saturday 10-11AM.

Anne Lackey

This Saturday, we will be discussing a ways to leverage other people’s money to maximize your return and make you the most money.

When should you use interest only loans? Is hard money bad? Fixed or variable rates? How much money should you put down on the property?

We will have Susan Pryor with Capital Funding & Mortgage Group joining us to discuss all the new developments in the lending market and how this will effect investing overall.

This is a show you won’t want to miss!

This week on “The Real Estate Investing Hour” Radio Show

SATURDAY
10:00 AM – 11:00 AM EST

Join us while we help you get focused and take your business to the next level. Learn ways to use other people’s money. we walk through the financing strategies and how you can use those strategies to increase your wealth.

Listen to “The Real Estate Investing Hour” every Saturday morning. Listen or watch live on-line at www.Love860.com or tune into 860AM on your radio dial in Atlanta.

Mark Lackey & Anne Lackey Co-Host every week to provide you the latest information on Real Estate Investing.

Below are our scheduled topics for discussion. Feel free to call in during the show with your questions & comments!

Upcoming Shows & Topics – Saturday Mornings 10-11 AM

August 11 – Financing Strategies for Investors
August 18 – How to have a Success Rehab
August 25 – Best way to Work with Contractors