If you're planning to buy investment property and financing it through a lender who sells to Fannie Mae, keep the date December First in mind. Nail down your mortgage commitments quickly -- in the next six weeks if you can.

That because Fannie -- who's traditionally been a key source of funding -- plans to load on extra fees across the board for investor loans purchased after December 1st because of market conditions. Freddie Mac is imposing similar fees, but its increases take effect November 7th.

Making things even tougher, some large private mortgage insurers plan to stop underwriting investor loans altogether, effectively cutting off financing support for low-downpayment, high leverage rental home deals, no matter where the property is located.

Fannie's new fees will hit the full range of investors, from those with low downpayments to those who are able to put down substantial cash. As of December 1, investor applications where the downpayment is between 10 and 15 percent, can expect a 3.75 point adverse market fee -- that's up from two and a half points currently.

Loans where the investor put down 20 to 25 percent will be subject to a three point add- on, and even investors making hefty downpayments of 40 percent or more will have to pay one and three quarter point add-ons.

The new fees come on top of earlier Fannie Mae restrictions, including limiting investor applicants to no more than four rental properties, plus a variety of restrictions on condos, including bans on mortgages in projects where more than 49 percent of the units are owned by investors.

FHA just announced a new rule change involving conversions of homes into rentals that you ought to know about as well. Though not aimed at bona fide investors, the policy change prohibits consideration of rental income on applications where an owner of an existing home proposes to acquire another unit as a principal residence using FHA financing while renting out the first home.

In a directive to lenders, FHA said it wants to avoid situations where home owners factor rental income from a vacated unit into their applications, and then don't -- or can't -- come up with the rent money needed to support the vacated house, which may then go into foreclosure.

FHA announced two key exceptions to the new policy: Relocations required by an employer where the applicant can show that there's already a one-year lease on the vacated home, or where applicants have at least a 25 percent equity stake in the property they are leaving behind.

Published: October 10, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.