The giant purchaser of mortgages on the secondary market is back in the headlines, this time delivering news that it'll further tighten up on acceptable guidelines for its portfolio. Just a few weeks ago its image took a step up when it agreed to buy jumbo paper from several large banks, thus helping improve refinance and purchase activity in high-value areas, like much of California is.
Most of the new changes touch on investors, second-home buyers and refinances.
Freddie Mac will no longer buy loans on investment condos and houses if the borrower owns either individually or jointly four properties with mortgages on them. Before this the limit was 10, so that is a rather serious contraction. Second-home buyers face the same restriction, four is the ceiling in combination of that home and possible rental units, come August 8 when these new rules go into effect.
As far as refinances go, Freddie Mac considers ineligible a cash-out refinance application if the same property has absorbed a refi in the previous six months. Its description of a refinance in this case is one where the new loan balance tops the old balance by 5% or more.
These are limits, yes, but how large a section of the total mortgage borrowing platform do they affect? Frankly, it isn't that much. How many second-home buyers own four units? There aren't too many homeowners, either, who are doing refinances every five months. The impact to the market as a whole looks to be rather minimal, probably more psychological than anything else.
Freddie Mac is understandably adjusting to the current risky market conditions and prefers now to drive along with both hands on the wheel and observe speed limits. That's only prudent.