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Fannie Mae has specific requirements for multiple financed properties: – If subject loan is owner occupied, Fannie Mae has no limit on

number of properties financed

– If subject is second home or investment and borrower has 1-4 financed properties, there are no restrictions however manual reserve calculation required

– If subject is second home or investment and borrower has 5-10 financed properties, specific eligibility requirements apply including but not limited to manual calculation of reserves

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The limitations apply to the total number of properties financed, not to mortgage obligations

Limitations vary based on type of property ownership Any percent of either ownership or obligation on a financed

property is considered “ownership” – Properties held by a LLC are included as they are considered personal

ownership – The following types of ownership are excluded:

• Ownership of vacant residential lot • Commercial real estate ownership • Ownership in timeshare or multi-family dwelling consisting of more

than 4 units • Property held in corporation where loan is in name of corporation

(cannot exclude if loan in name of borrower)

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DU engine does not properly apply the eligibility requirements to borrowers with multiple financed properties for a loan on a second home or investment property

DU cannot determine the number of financed properties

As such, all eligibility criteria must be manually applied on these transactions – Cannot rely on a DU Approve/Eligible-must manually review for

eligibility

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DU comes back with specific wording. The responsibility lies with the Underwriter to review the transaction manually for eligibility:

Verify the number of properties being financed. If the borrower will own 1 to 4 financed properties, the lender must verify that the borrower meets the reserve requirements for investment or second home transactions as specified in the Selling Guide. If the borrower will own more than 4 financed properties, the loan case file must comply with the eligibility, underwriting, and delivery requirements specified in the Selling Guide; Cash-out refinance transactions are not eligible if the borrower will own more than 4 financed properties, unless the loan meets the cash-out exception for delayed financing. If the borrower will own more than 10 financed properties, the loan is ineligible for delivery to Fannie Mae.

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Second home or investment subject loan where borrower owns 5-10 financed properties must meet following additional eligibility criteria – Minimum FICO 720

– See matrix for LTV restrictions; special guidance applies to ARM’s

– Manual calculation of reserves - 6 month PITIA reserves required on each financed second home or investment property owned

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If subject is second home or investment, with borrower owning more than 4 financed properties, cannot cash-out unless delayed financing exception met – DU “alerts” the Underwriter with the messaging below:

If the borrower will own more than 4 financed properties, the loan case file must

comply with the eligibility, underwriting, and delivery requirements specified in the Selling Guide; Cash-out refinance transactions are not eligible if the borrower will own more than 4 financed properties, unless the loan meets the cash-out exception for delayed financing.

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To meet the requirements of Delayed Financing Exception, financing could not have been used for the original purchase transaction and all of the following must be met: – New loan amount cannot exceed borrowers initial documented

investment to purchase (see matrix for additional details)

– Purchase transaction was arms-length transaction

– HUD-1 from original transaction required

– Title evidences no liens on subject

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Source of funds used to purchase property can be documented to confirm they were borrower’s own funds – Including Earnest Money Deposit

– Gift funds are non-reimbursable

– If the source was a HELOC secured on another property, the HUD1 must reflect this HELOC being paid off from proceeds of new cash-out transaction

Property was purchased within the previous 6 months – Purchase date to disbursement date of new loan

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Manual Reserve Calculations required if subject second home or investment with financed properties follow:

1-4 Financed Properties: – Additional reserves are 2 months for each financed second home or

investment property

5-10 Financed Properties: – Additional reserves are 6 months for each financed second home or

investment property

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Follow the below guidance when entering reserves in DU for multiple financed properties: – Subtract the amount of the required reserves for the financed

properties, other than the subject property, from the borrower’s liquid assets

– Enter only the remaining assets in DU

– Verify and document the assets necessary to meet the reserve requirements for the financed properties

– Verify and document the assets entered in DU as per the DU Findings report

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Planet Home Lending limits the number of properties financed by Planet Home Lending to a maximum of 4 – There is no dollar exposure limit

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