Thanks to the Wisconsin Realtors Association for bringing this to my attention:

Fannie Mae announced Friday that it will tighten lending requirements for the interest-only loans and adjustable rate mortgages (ARMs) it backs.  To get a Fannie Mae-backed interest-only mortgage, for example, homebuyers will have to make down payments of 30% of the sale price. 

For adjustable rate mortgages, Fannie will only buy those underwritten to ensure that borrowers could still afford payments even if their interest rates reset to the higher of either 1) the loan’s initial interest rate plus two percentage points or 2) the maximum the interest rate the loan can rise to, known in the industry as the cap rate.
Meanwhile, Fannie says it will stop funding so-called balloon mortgages. The new guidelines go into effect after August 31. o top of page

Source:, Les Christie, (04/30/2010)

I think this is good start.  Interest only loans are typically not a good idea.  The whole purpose of a loan is to eventually pay it back.  It’s a rare occurence when using this type of loan is a sound financial decision.  It’s nice to see that the government (Fannie Mae) is finally pulling back on programs that got us into this mess.  They are a few years too late.

What do you think?

Michael Collins – Broker
Rock Realty
Rock Solid Real Estate Strategies
PO Box 2444
Janesville, WI 53547-2444
c: 608.921.8536
f: 877.774.7625

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