Question: Do we need to treat business purpose loans sold to Fannie Mae or Freddie Mac differently than business purpose loans NOT sold to the agencies?
Answer:
Yes, you should always verify an investor’s guidelines regarding business purpose loans as they vary. The agencies maintain several rules applicable to business purpose loans that many other business purpose loan investors do not require. For example, while the 3% QM points and fees requirement does not apply to any business purpose loans, Fannie Mae and Freddie Mac maintain an overlay whereby all loans sold to Fannie Mae and Freddie Mac need to pass a 5% Points and Fees requirement (regardless of a business purpose).
In addition, while many non-agency investors require a prepayment penalty on business purpose loans, any loan (including business purpose loans) sold to Fannie Mae or Freddie Mac may not contain a prepayment penalty.
Be mindful of business purpose loans in the secondary market as many non-agency investors carry their own overlays and these are inconsistent in the marketplace.
