Fannie mae restricting investors

[Robert Madison]

Was in the process of purchasing a investment property and the residential bank notified us of the new policys that were put out last Friday restricting residential loans from 3.2% to 7% for investors.  

  anyone know the reason for this move?  Could they be preparing for a crash?  That is a sizable rate hike overnight.  

[Andrew Eherts]

Hi @Robert Madison I did some research into this. They aren't referring to interest rates (thank the Lord... my heart dropped). This is actually a tightening of underwriting standards, and the restriction you mentioned is in terms of the lender's portfolio. In essence, regardless of what a lender's investment property deployment was, it now has to be 7% or less of their lending pool. 

That implies that the market for loans is going to get competitive. Are they expecting a crash? It depends on what part of the country you are looking at. From a pure price index standpoint, some are picking up momentum while others are peaking--the exact place in the cycle is different for each metro. 

If you were worried about interest rates jumping 2-3x, rest assured. That would grind investment activity to a halt, which equals very bad news for national savings and GDP growth. They are slowly hiking rates from these artificial lows, but this will be 25 or 50 basis points over the span of quarters.