Major lenders and mortgage insurers are turning off the money spigot for investors who want to buy rental houses or condos with minimal downpayments.

The most dramatic cutback takes effect next week, when giant mortgage insurer United Guaranty — a subsidiary of AIG International, the world’s biggest underwriter — says it will stop covering loans to investors in any of the thousands of Zip codes from coast to coast that it defines as "declining" real estate markets.

The ban includes all non-owner-occupied rental houses or condos — including "mom and pop" two-to-four unit properties where the owners occupy one and rent out the rest.

United also is cutting off coverage of all condominiums and cooperatives - whether owner-occupied or rental — plus all second home purchases. It’s even refusing to look at loans to investors or owner-occupants that have limited documentation in any market, whether declining or not.

Other major mortgage insurers are expected to follow some, if not all, of United’s tough new restrictions in the coming weeks.

Add to that Fannie Mae’s and Freddie Mac’s new guidelines on condominium financing, which are causing condo associations to adopt stricter rules on the percentage of units owned by investors — and you’re looking at some crunching changes underway for small-scale investors.

To discuss your financing options please feel free to contact Terrence Tormey, your Mortgage Planner at Benchmark Lending (732) 993-3639 or by E-mail ttormey@BenchmarklendingSolutionsUSA.com

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 Tuesday, April 29, 2008