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Most people agree -- purging home inventory is paramount to the housing recovery, Fannie Mae just made that recovery a lot more likely.  Effective immediately, Fannie Mae is rescinding its 4-financed-property per person restriction.

If you turn down Pandora and listen closely, you can hear real estate investors in Chicago cheering all the way from Cincinnati.

Read the Fannie Mae official announcement, you get the sense that the nationalized group is getting with the program. This excerpt comes from the lead paragraph:

Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery.

The use of the adjectives "high-credit quality", "bona fide" and "experienced" was a conscious one, by the way.  Fannie Mae is averse to first-time investors and other foreclosure opportunists. Instead, it wants to serve individuals with a history of owning and successfully managing rental property.

To that end, Fannie Mae will now finance the purchases of 1-unit homes for investors with an interest in between 5 and 10 properties provided that all of the following guidelines are met:

• 25 percent downpayment on the investment property
• Minimum credit score of 720
• No mortgage lates within the last 12 months
• No bankruptcies or foreclosures in the last 7 years
• 2 years of tax returns showing rental income from all rental properties
• 6 months of PITI reserves on each of the financed properties

And lastly, to reduce fraud, Fannie Mae will now require all real estate investors to sign a form granting lenders permission to verify supplied tax returns against the official, IRS-filed version.  This document is less commonly known as a 4506-T.

But lest we think this guideline change is Fannie Mae's olive branch to the people, let's remember that our nation's banks are holding record numbers of foreclosed homes on their balance sheets right now while the most likely buyers of those homes have been to-date locked out from financing. 

Real estate investors want to buy REO but Fannie Mae had made it impossible. The guideline change is meant to extend banks and lenders a lifeline first; bringing experienced investors back into the fold is just how it's getting done.

That said, real estate investors are lovin' it.

For the first time since September, investors can go to auction and know that (relatively) cheap financing will be available from the government.  This should speed the reduction of REO inventory nationwide.  In addition, with more investors eligible for financing, expect greater competition for prime foreclosed properties, helping to keep home prices from falling into the abyss.

The rollback gives a secondary benefit to investors, too -- even those not buying additional property. 

See, when the 4-property restriction went into effect, it was a surprise, 11th-hour announcement made on the Friday before Fannie Mae's nationalization.  This date, meanwhile, has come to be known as the Day Before The Refi Boom Started. 

So, on the following Monday, when mortgage rates instantly plunged three-quarters of a percent, homeowners with 5 properties or more found themselves ineligible.

They couldn't refinance their investment homes, they couldn't refinance their vacation homes, and they often couldn't refinance their primary homes, either. While rates fell for nearly every borrower class, experienced real estate investors were locked out. Today, that's no longer the case. "High-credit quality, bona fide" real estate investors are back in the game.

It's good for them, it's good for the banks, and it's good for housing.

Not every bank sells loans to Fannie Mae, however, so if you think the new guidelines will impact your mortgage plans, be sure check with your loan officer first.  If your loan officer can't help, I can.  and we'll get started.