I was equally surprised and pleased to see that in the just-released guidelines for the refinance part of the Obama housing plan, second homes and small rental properties are eligible. Again, this is the refi part, where, if you have a loan owned or backed by Fannie Mae and Freddie Mac , you can refinance even if you have up to 5 percent negative equity in your home (i.e. your home is worth up to 5 percent less than the value of your current loan). The modification part of the housing plan is still only for owner-occupied primary residences.
Allowing refi’s on second properties is extremely important, especially as more people move out of homes they can’t afford and into rental properties. A lot of owners of rental properties are experiencing the same financial difficulties as primary homeowners, and having the refi option can potentially help these investors keep the home and keep the tenants in the home as well. Scores of rent-paying tenants are being evicted as rental properties are going into foreclosure.
The program requires that borrowers be current on their loans in order to be eligible for a refi, so that weeds out investors who really took on more than they could handle. Many of you may argue that investors or borrowers who have enough money to have a second home don’t deserve government help. But this part of the plan isn’t giving money away, it’s simply allowing borrowers refinance into today’s current market rates (not the 2 percent loans that we’ll see in the modification plan). The only reason these borrowers were cut out of the refi option was because of the falling equity in their homes, equity which will in all likelihood begin to grow again in the next five years.
I applaud Fannie and Freddie and the government that backs it for including investor/rental properties. I’m sick and tired, as I’ve blogged before, of the Administration trying to draw some line between “responsible” and “irresponsible” borrowers, often referring to people who own second investment properties as the latter and throwing in that nasty “speculator” name. Quality rental properties are necessary, especially in today’s housing environment, and consequently quality landlords are necessary as well. Including these landlords in the refi option is essential to make sure more families continue to have a roof over their heads.
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