There are of course all kinds of parameters, including maximum LTV (loan-to-value ratio), documentation, arms-length transaction and "all other cash-out refinance eligibility requirements and cash out pricing applied." The mortgage cannot be larger than the value of the home of course.
Hands down, this is a boon to investors, who can now get equity out of their investments faster. It's also a boon to home buyers who couldn't compete in the long term with all-cash investors, but who might be able to put down the cash for a few weeks before obtaining a mortgage.
So is this a "loosening" of standards that could fuel all those nefarious investors of the housing boom? Wait, maybe today's investors aren't so dangerous after all (as I've been saying over and over).
"We continually examine our policies and standards to determine what changes to make to better serve the market, and this is one of those changes," said Fannie Mae spokesman Andrew Wilson.
"There is a role for everyone in stabilizing the market, including those who invest in properties to repair and improve them, owner occupant buyers, and those that build and maintain quality, affordable rental units," Wilson said. "We believe our requirements are carefully crafted to ensure that we are financing legitimate buyers who opt to purchase with cash."
All-cash buyers are now one-third of the market and far higher in the more distressed markets. Most all-cash buyers are investors, but owner-occupants are also trying to take advantage of reduced pricing on distressed properties; trouble is they can't always compete in the all-cash arena.