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Fannie Mae has no seller title seasoning requirements.

Posted by CC in OC on May 10, 2009 at 1:47 AM

In Reply to: Fannie Mae with no seasoning? posted by Kristine-CA on May 08, 2009 at 4:39 PM

That's right...Unlike FHA, Fannie Mae has no explicit seller title seasoning requirements for a subsequent sale, but most LENDERS do. Fannie Mae has CASH OUT REFINANCE seasoning requirements. Here's how the condition reads:

"This loan casefile has been underwritten as a limited cash-out refinance--[that is, sufficient cash out to pay closing costs, not cash in hand to the borrower]. If the first mortgage being paid off with this transaction was used to pay off any subordinate financing that was not used to acquire the property, and that mortgage has not been seasoned for at least six months prior to the date of the loan application, the loan is ineligible for delivery to Fannie Mae as a limited cash-out refinance. In addition, the property must not be currently listed for sale."

Despite the fact that there's no direct Fannie Mae prohibition against flips (same for Freddie Mac), most lenders take it a step further and interpret the seasoning relative to cash out refi as applicable to a purchase by a new buyer before six months ownership by the seller. Some lenders even extend this seasoning requirement to 12 months. To these lenders, sales proceeds to the seller in excess of what the seller paid for the property is the same as juicing the property via a cash out refi. Such a prohibition is called a "manual risk overlay."

The get-around is to develop a list of lenders that have no seller title seasoning requirements. There aren't very many, but they do exist. Until recently, for example, Citimortgage had no seller title seasoning requirements. I have previously listed such lenders, but those posts were quickly deleted; ostensibly because they were viewed as advertisements. (Go figger.) If anyone would like the (short) list of lenders that require no seller title seasoning, you can write to me off-board.

Many non-conforming and portfolio lenders don't have seasoning requirements, but the seller is required to demonstrate why a property he bought for $X in January is worth $X+ in February. Before and after photos, before and after appraisal and receipts for renovation are helpful in this regard. Typically, such lenders will charge more for a no seller title seasoning loan. The seller can direct the buyer to utilize such a lender, but the seller had better be prepared to buy down the rate to be equivalently competitive as those lenders that prohibit flips. After all, it's not the new buyer's concern that the flip-investor has title seasoning problems.




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