What Do Fannie & Freddie's Recent Changes Mean for Small-Time Investors?

Fannie Mae and Freddie Mac recently announced that they will be allowing banks to have only 7% of their books as second homes or investment properties. In this episode we discuss what these limits mean for small time investors.  --- Transcript   Tom: Greetings, and welcome to The Remote Real Estate Investor. On this episode we're going to be talking about a topic that came up recently on Reddit, it was related to Fannie and Freddie Mac's new announcement that they will only be allowing banks to have 7% of their books as second home and investment properties. We're going to talk about broadly what that means, kind of some crystal ball thoughts on how that could impact remote investors and real estate investors in general, and just kind of riff on it. So Alright, let's do it.   Welcome back, everybody. So before we get into it, just a reminder, this is the hosts opinions and thoughts. This is not opinions and musings of Roofstock. This is this interesting news came out. But before we get into it, who do we have on the call right now? Who am I co hosting with today?   Micheal: Michael Albaum,   Emil: Emil Shour   Tom: Awesome. Alright, so let's unpack this news that came out today related to Fannie and Freddie's guidelines around allowing banks to only have 7% of the books as second homes and investment properties. So Michael, do you want to lead with an initial little speech about a kind of unpacking this this update?   Michael: Yeah, totally. So I mean, it's really interesting that they came out with this announcement, and that they're really going to be limiting the amount of loans that they're purchasing, which is I'm imagining going to have an upstream a pretty dramatic upstream effect on folks. And so basically, as it stands right now, when somebody goes to buy a home, for as an owner occupant, they can typically get what's called a conventional loan through a lender, then that's bought on the secondary market by Fannie or Freddie, these government backed institutions, and they subsidize the cost of the loan, which is why the interest rates tend to be so low versus going to a hard money lender or a private lender, the rates tend to be a bit higher.   So investors can do this too, we can go get conventional loans, or conventional lender that gets sold in the secondary market for investment properties, we tend to pay a little bit of a higher interest rate, because it's not our primary residence, and that's perceived as a higher risk. But we can still get access to very cheap debt.   Now, the fact that Fannie and Freddie are going to be limiting the amount of total investment and second home loans on their books means that they're just going to be buying a whole lot less of the investment property and second home mortgages from those origination lenders. So I think that it's going to force a lot of investors to have to go outside the conventional route. And they'll probably be looking more towards commercial and private capital, my guess is there's going to be some new players that emerge in the space to service those types of loans, because now there's a real opportunity, investors are not going to slow down acquisitions, any, they're just going to have to pay a bit more for the debt. And so the the days of super, super cheap debt being backed by the federal government, probably behind us, and I think it was, as of April 1, these new guidelines are going into effect.   Tom: Yeah, you know, I guess, like kind of down the line, it's going to be tighter for investors, you know, loading up on conventional loading loans for investment properties. And I guess it's the same, but for owner occupied buying those properties, it's just, I guess, frees up a lot of those traditional lenders to just serve as more of those type of loans.   Michael: Yeah, I think we're gonna see a lot more house hacking because of that.   Emil: I wonder if this just means, you know, banks make money every time they do a loan, right? They make mon