Connect with us

Hi, what are you looking for?

The American GeniusThe American Genius

Housing News

Fannie Mae changes guidelines for interest only loans

Fannie Mae’s plan for interest only loans

Fannie Mae has announced that it will be tightening requirements for the interest only loans they back effective August 31, 2010. Buyers will be required to make a down payment of 30% of the sale price among other tighter requirements.

For an interest only loan, Fannie Mae will require a minimum credit score of 720 and qualification will be based on buyers having enough in the bank to cover the mortgage for two years as a fall back cushion.

Fannie’s ARM plan

Adjustable rate mortgages will see altered guidelines as well to insure borrowers can afford the payments even if rates reset higher. Borrowers will have to qualify based on two percentage points above their original interest rate and qualify based on the cap rate.

“Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term, while helping our lender partners offer a range of mortgage products for qualified borrowers,” said Marianne Sullivan, Senior Vice President of Single Family Credit Policy and Risk Management at Fannie Mae, in a prepared release.

Consumer and agent response

Bubble bloggers and the like point out that a move like this some time ago might have curbed much of the crash if Fannie Mae had been more stringent to begin with.

Advertisement. Scroll to continue reading.

Fannie Mae says these new guidelines force only buyers with the ability to use these loans “as a financial management tool, rather than as an affordability tool” can qualify. This position has investment brokers and rental property investors reevaluating how they will invest come this fall.

Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.



  1. Doug Francis

    May 4, 2010 at 10:44 pm

    The first “interest-only” loan I saw was around 1995 through Merrill Lynch. My client (the buyer) had to place about 30% of the home’s value in a special Merrill asset management account and then Merrill provided the financing.

    The listing agent was having a fit because it was so unorthodox… but it worked out well since the value of the “locked” investments rose significantly as did the value of the home.

Leave a Reply

Your email address will not be published. Required fields are marked *


American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.



Real Estate Technology

(TECH NEWS) It turns out that Internet of Things, like smart bulbs in homes, are not secure and give up your info - here...

Real Estate Marketing

(MARKETING) Your fancy, self-animating website might be making people violently ill, even if it is insanely beautiful. Sorry...

Real Estate Marketing

(MARKETING) Conduit is a CRM that does more than CRM, it analyzes your networking data to help you see how to improve your relationships.

Real Estate Corporate

(REAL ESTATE) Zillow has long been a data powerhouse, but a lawsuit about a $150M listing offers a look into listings claims.

The American Genius is a strong news voice in the entrepreneur and tech world, offering meaningful, concise insight into emerging technologies, the digital economy, best practices, and a shifting business culture. We refuse to publish fluff, and our readers rely on us for inspiring action. Copyright © 2005-2022, The American Genius, LLC.