I have two different second home loans that I would love to refinance (no cash-out) as investor properties but apparently Freddie Mac's strict eligibility requirements and Fannie Mae's cumbersome investment property penalties (1.75% points) are preventing me from refinancing either with a 3-year breakeven.

I have a 777 Transunion FICO score (updated today per www.creditkarma.com), more than 5 year cash reserves, and 4506-T verifiable income around $120,000K (more like closer to $200,000 since I own my own business) so on all these measures I easily exceed the criteria.  Also, both loans are escrowed and both properties are essentially cash-flow neutral factoring all costs.

The first loan (30-year fixed at 6.125%) is in Florida, secured by Freddie Mac, and serviced by Wells Fargo with an LTV of 72% on a balance of $105,000.  Freddie Mac's HARP does not add 1.75% investment property points and only .5% loan value points making a 3-year breakeven feasible (assume reissue title insurance rate).  However, since Freddie Mac's HARP program requires same occupancy status (no second home to investor property) I do not qualify.

The second loan (30-year fixed at 5.785%) is in Texas, secured by Fannie Mae, and serviced by Countrywide with an LTV of 72% on a balance of $110,000.  Fannie Mae's HARP does not have the same occupancy status restrictions so I qualify but with its 1.75% investment property point penalty a Fannie Mae HARP does not offer a 3-year breakeven.

1.  Is my analysis correct on both HARP programs?

2.  If so, does anybody know if Freddie Mac is likely to loosen its guidelines or Fannie Mae is likely to make its program more useful for investors?

3.  Can anybody reasonably offer a 3-year breakeven on either loan without the HARP program?

Thank you for your help,

Michael

1. Yes

2. Doubtful at this time

3. With the lower loan amounts, a 3 year break even is probably not attainable.  Even with only $2400 in net costs, you would need to drop your rates approximately 1% in order to break even in 3 years.  Given the problems that you identified and the high closing costs in FL, I think you could find a break even point in about 4-5 years.

On a side note, you have very good rates given that the properties are for investment purposes.  Good luck.

Thanks.

Well if Freddie Mac adopts Fannie Mae's investment property eligibility requirements or if Fannie Mae adopts Freddie Mac's investment property pricing guidelines, feel free to contact me as I will have a ready-made refinance.

Thanks,

Michael