Since overnight bank financing rates are close to zero, investors always have cash – liquidity they use to compete. Fannie Mae and Freddie Mac in the secondary mortgage market.
Investors who typically deal with large loans are infiltrating Freddie and Fannie’s territory by financing smaller loans below the mortgage agency’s dollar limit, according to a column in the Los Angeles Daily News.
Borrowers can now get a 30-year flat rate mortgage for $ 2 million at 2.65% – a better deal than what Fannie could offer, the column notes. And they can borrow without mortgage insurance by paying at least 10.1% of the down payment on loans ranging from $ 550,000 to $ 2 million. Fannie and Freddie, known as government sponsored organizations or GSEs, require insurance.
Private lenders offer a loan limit of up to 89.9 percent compared to Fannie’s 80 percent. The column states that prices for 30-year, non-owner-borrowed, fixed-rate loans start at 2.75 percent, while government-backed companies offer between 3 and 3.5 percent for mortgages of that length.
To make it easier to obtain permits, investors are also removing outdated underwriting rules. Some lenders only need one year of tax return to obtain a loan, rather than the two years that traditional giant underwriting favors.
They also bypass fees and restrictions such as loan level adjustments and other hurdles imposed by the Federal Housing Finance Agency, which oversees Fannie and Freedie.
[Los Angeles Daily News] – Suzanne Cavanaugh