Loan Slots Towards 10 Fannie/Freddie Backed Loans

[Mark S.]

Not sure why this is such a difficult question. I've heard different things from different people. I've spoken with both DSCR lenders and conventional lenders. No one seems 100% sure. I've heard everything from yes, no, I don't know, and here, read these guidelines.

I have 6 conventional Fannie/Freddie backed loans: 1 on primary, 5 on single family rentals. This takes up 6 of the 10 allowed conventional loan slots, leaving me 4 loan slots for Fannie/Freddie backed loans. If I do a DSCR loan for the 5 rentals and in the process the 5 Fannie/Freddie backed rental loans are paid off, how many conventional Fannie/Freddie loan slots do I now have? 9? Still 4?

Some say it is based on loans. Some say it is based of financed properties (does a DSCR loan count then because those properties are technically still financed - only now by a DSCR loan instead?)?

Does anyone have a definitive, absolute answer on how this works?  

[Stephanie P.]

@Mark S.

The confusion comes from the wording and the fact that many brokers and lender's have an inherent lack of comprehension for the written word.

The Fannie Mae seller guide says "financed" properties count against your 10.  That's pretty straight forward.

Here are the scenarios that trip the brokers and lenders above and subsequently frustrate borrowers.

1. Properties don't show up on credit; so what, they'll be on your taxes and conventional financing requires you to show your taxes and when you do, the underwriter will tie the financed properties to their mortgages and consider them financed.
2. They're in an LLC; so what, the LLC is a pass through entity that attaches to you personally and the lender, when you signed your closing docs, required you to personally guarantee the loan. If the loan is personally guaranteed, it is financed.
3. But I'm doing 5 properties with one loan; exactly.  They're all financed with one loan.  

The DSCR route works best in your situation, but it will not allow you to free up conventional slots. The only way to open up slots would be refinance higher equity properties and leverage them to pay off properties with smaller loan sizes making them free and clear.

Hope that clears it up.

Stephanie