Are you upside down on your small multi-family property due to the decline in values in the real estate market?
When the program was first announced, it appeared that small multi-family investors and people with second homes wouldn’t be allowed to participate. The guidelines however, included you after all.
According to Kenneth Harney of the Washington Post, the new programs, which are being undertaken at the urging of President Obama’s administration, would allow you to refinance provided you have a solid payment record, the balance on your loan doesn’t exceed the value of your property by more than 5 percent and your loan is either owned by or contained in a mortgage bond guaranteed by either Fannie or Freddie.
It gets better.
Both companies plan to waive their usual minimum credit score requirements for most people who apply. Oh, they’ll still pull your credit. But there’s no specific minimum score necessary to refinance.
There’s also no mortgage insurance. If your loan originally required the insurance, you still have to have it. However, borrowers who never had mortgage insurance because they had 20 percent equity before the decline in market value will not be required to purchase new coverage.
While most of the guidelines between the two companies are identical, there is one area where they differ. Fannie Mae allows borrowers to contact any of its approved lending and servicing partners for refinance quotes. Freddie, on the other hand, requires you to go through your existing lender.
So what does all of this mean to the Minneapolis duplex market?
First, the government hopes that by keeping more multi-family properties out of foreclosure, they will reduce the number of evictions. This will keep more good tenants who paid on time and are being evicted through no fault of their own in their homes. With more rental units available, we may see an impact in the vacancy rate.
We may also find the number of properties being foreclosed upon drops. This will ultimately effect the amount of inventory available for purchase. With less to choose from, and the enticements of low interest rates and the $8000 first time home buyer tax credit, we may see an uptick in values.
Of course, it’s still too soon to tell whether any of this will ultimately turn things around.
Remember, interest rates are low now, and there is still a healthy supply of nice properties to choose from. If you’re considering buying a duplex, triplex or four-plex give me a call, I’d be happy to help you find one that’s right for you.