D.L. Bennett / The Atlanta Journal-ConstitutionAtlanta-area real estate investors, like their counterparts around the country, say a new four-loan limit is keeping good buyers away from foreclosed properties — and could actually prolong the recession.
The new policy, which limits to four the number of real estate loans by one person that will be backed by mortgage giants Freddie Mac and Fannie Mae, has spread to most local and national lenders. Experienced investors, frustrated and angry, complain the limits prevent them from buying bargain homes and possibly helping resolve the mortgage crisis.
“How does it affect us? We’re paralyzed,” said Joe Ard, a Peachtree City investor who also runs Vestlet.com, a Web site that identifies properties for other investors. “I don’t need Big Brother watching me. I’ve got 19 houses. I’m making payments on them.”
“How does it affect us? We’re paralyzed,” said Joe Ard, a Peachtree City investor who also runs Vestlet.com, a Web site that identifies properties for other investors. “I don’t need Big Brother watching me. I’ve got 19 houses. I’m making payments on them.”
The new policy, which went into effect Dec. 1, was designed to keep small-time investors from getting in over their heads and losing numerous rental properties to multiple foreclosures. The previous 10-loan limit was easier to get around, investors say.
The hard four-loan limit has no exceptions for income, credit status, assets or history of success as a real estate investor.
Ard says that restricts good investors — the most likely buyers for most foreclosures — from helping to turn around the foreclosure mess.
“The people who are going to pull us out of this are investors,” he said, “and we can’t help.”
Other Atlanta real estate investors agree the stricter rules will extend the current crisis by keeping foreclosures on the market longer and drive down home values.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, a Dunwoody mortgage broker and real estate investor. “It’s going to keep qualified buyers out of the market.”
Hutchens said three years ago he was making investor loans at 95 percent or more of the market value. At the same time, banks could not count the mortgage against the credit of the investor if he or she presented a contract to rent the property and cover the note. Those contracts were easily manufactured and not closely checked by loan officials, he said.
“I’m not going to say it was fraud,” Hutchens said, “but it was very loose.”
Banks now demand at least 20 percent down for investor loans, strict appraisals and are refusing to count up-front contracts as income to pay them off. They no longer allow cash-out refinances on the day of closing. Fannie Mae and Freddie Mac both now require at least a six-month wait before a reappraisal and refinancing to pull out cash.
Investors argue those reforms should be enough to ensure that loans go to quality investors.
They complain that limiting the number of loans keeps well-heeled investors — folks the government should be encouraging to buy houses during the downturn — from snapping up the bargain houses that are driving down values all over metro Atlanta.
John Adams, a real estate investor who owns dozens of homes and advises others through seminars, newsletters, a radio show, a Web site and a column in The Atlanta Journal-Constitution, said the limit has kept him from buying. He said he’s not willing to go to hard-money lenders or put up his own cash to buy houses.
“I’m sitting here as an observer,” said Adams. “I ought to be putting people to work.”
John Clark, an investor who lives in Dacula, said he’s trying to work around the limit by enticing private investors to put up money for house flips and rentals. Cash purchases aren’t covered by the rule.
Still, he’s unhappy about being unable to get a loan.
“If you are a full-time investor with good assets and documentation, ” Clark said, “you ought to be able to get a good loan. They have absolutely locked down the good group because of the bad. There are a lot of good investors out there.”
