Continuity of Obligation - Fannie Mae just removed their rules

Continuity of Obligation was a policy that came about during the financial crisis that basically limited the amount of loan you were able to obtain from a property after taking or being "added," to title on a property. The policy was implemented mainly to reduce the mortgage agency's risk of over extending loans on distressed properties during a time when property values were in free fall. Fannie mae has since removed this policy so there are no more loan to value restrictions after being added to title. This does not mean you dont have to wait 6 months to cash out, but rather you're not subject to the rules of "continuity of obligation," or COB below.

Its important to note that COB never affected properties acquired that were free and clear. It only affected properties that had debt tied to the property when a new person/entity was added to title. 

The rules used to be that:

1) if you were added to a title of the property within the last 2 years or 24 months

2) that had a loan against the property and you were not obligated on this loan

then you'd be limited to 50% Loan to value for up to 2 years unless you qualified for certain exceptions below:

- 1) you acquired title and have met at least one of these criteria:

- lived in the home for min of 12 months, 

- paid the mortgage for 12 months or

- can demonstrate a relationship with the current obligator on the mortgage  on the underlying property

- 2) you acquired the property through inheritance or by court order via divorce or other award

- 3) you owned the property indirectly through an entity  that was transferred into your name from a LLC, trust, partnership, etc where your share was at least 25% or more (transfer from a S or C corporation does not meet exception)

- 4) been on title for 24 + months 

These restrictions are no more, so plan your loans accordingly. If you have any questions feel free to let me know.