FNMA deed restrictons - Posted by Judah hardmoney Hoover

Posted by jason on June 13, 2006 at 16:08:55:

I figured the title co. would do the dirty work…too much for FNMA.

FNMA deed restrictons - Posted by Judah hardmoney Hoover

Posted by Judah hardmoney Hoover on June 12, 2006 at 14:42:43:

ARV 85k
Purchase price 35k
Rehab 18k
Was going to lend 59500
FNMA capped amount that could be mortgaged at $41,800

I just lost a deal because I could not lend purchase + rehab + closing costs. FNMA put a deed restriction in. They limit the amount of mortgage the buyer could take out to 120% of purchase price for 90 days. I have never seen this before, has FNMA changed something? Is there a way to get around deed restrictions like this? It was written in fine print in the purchase contract so: the buyer, me, title agent, and legal counsel (all who look before we lend) missed the restriction. We missed it until the deed came over the day of the settlement. Officially the buyer shouldn?t have signed the contract with that in, but is it an offer FNMA will accept with out it? I lend hardmoney on a lot of bank REO?s that are actually FNMA owned? this could cause problems. I already posted on the main side but was hoping for some experienced insight.
I hope a wise man like John Corey can put down the copy of ?Great Englishmen? he is reading today and help us out.


Re: FNMA deed restrictons - Posted by Ben Carmona

Posted by Ben Carmona on June 12, 2006 at 15:38:22:

All properties sold of the FNMA foreclosure list have a deed restriction. This restricts a sale or any financing over 120% of the purchase prices. This means if you buy a property with cash or 100% financing that you cant take out more than a 20% over the sales price. It also means that you could not use a rehab loan as this would mostly exceed the sales price. Furthermore it also means that an investor can’t finish a project and sell for the profit they probably intended. They are trying to limit fraud. You can call up Fannie to discuss getting it removed but it’s not likely.

This originally started out in certain markets throughout the US and was for 12 months. They reduced to 6, and just a couple weeks reduced to 3 months and is now nationwide.

Any listing agent selling for Fannie Mae should be letting investors know about this upfront.

Some banks, not all, have followed suit when selling their reo properties.

Ben Carmona

Re: FNMA deed restrictons - Posted by jason

Posted by jason on June 12, 2006 at 15:43:26:

Im dealing with the same restriction. Just curious HOW they enforce it, once deed is in my name?

What if the person buying from me doesnt get a fannie backed loan?

Re: FNMA deed restrictons - Posted by Ben Carmona

Posted by Ben Carmona on June 12, 2006 at 17:47:56:

The financing provided to your client does not make a difference. It could be a hard money loan being made to the property and they still cant fund more than 20% over the purchase price.

The enforecement will come from the title companies. I spoke directly with an attorney from Fannie Mae who acknowledged there really is no clear way they can monitor all of the deeds. There are fines and I’m sure legal issues that would be addressed if overlooked.

Ben Carmona