22 Mar Less Loans for Freddie Mac and Fannie Mae Equals More Loans for You
This year the US government has mandated that the government-sponsored loan providers Freddie Mac and Fannie Mae reduce the amount of permanent loans they can offer to multifamily housing properties. This means that real estate investors who are interested in purchasing or financing multifamily rental properties will have less competition to deal with, which could help them secure better loans for their own investments.
New Regulations
Less Loans for Freddie Mac and Fannie Mae Equals More Loans for You.The new 2013 regulations will cut down the amount of lending to multifamily properties that Freddie and Fannie can produce, which should show cuts of around 10%. This reduction in the amount of loans that can be offered is expected to be achieved by increasing the prices of the loans, reducing the amount of products that can be offered and tightening up the underwriting standards for both companies. This reduction is thought to be the result of Fannie Mae and Freddie Mac’s direct involvement in the 2008 financial crisis, where almost 85% of multifamily property financing was produced by these two loan providers.
Less Fannie and Freddie Lending Means Banks Can Offer More Choices to Investors
How will the reduced amount of government sponsored multifamily property lending choices help you as a real estate investor? The activity of multifamily property lending has sharply recovered from the market problems and the recession of 2008, meaning more multifamily properties are available for loan acquisitions. Over the last few years, when these two government-sponsored loan providers were handling such a large volume, other banks and lending institutions have had to be more competitive and aggressive with their loan options. With less of these properties available to Freddie and Fannie, there are more properties open to outside investors. This will open up various loan options for these multifamily properties for regular investors. Also, banks and other lending institutions will be able to make better offers to normal investors.
2013 Demand
According to the Mortgage Bankers Association, the demand for loans for multifamily commercial properties is expected to either stay where it is or drop slightly. This is based on the fact that fewer multifamily loans are reaching a mature state where they would need to be refinanced. Scaling back on the amount of volume that Freddie Mac and Fannie Mae can handle per year will help to reduce the likelihood that they will end up flooding the market as the demand for loans drops. This should leave some room for interested investors.
Why Invest In Multifamily Real Estate?
Even though there will be less demand for multifamily property loans, now is still a good time to invest in these kinds of real estate properties. The reason is that other lending institutions will still be able to provide good financial leverage, including anywhere from 75% to 90% of the total price of the property. Other benefits of investing in this kind of real estate include high rates of return on your investment, the ability to create monthly or yearly income, the ability to have your tenants make your mortgage payments for you and appreciation of value of the property as time passes. There are also many tax advantages of owning these types of properties, including the ability to add up the depreciation of the property and its assets.