In 2008 many homeowners saw the value of their houses drastically drop. Same models were going for half their price in some areas. With this in mind they purchased an additional home and rented out their existing homes. Upon closing on a new home, payments were stopped on the previous home and foreclosed upon.

With this situation increasing in numbers, FNMA, FHLMC, and FHA put in place what we know as the Buy Bail Policy. Basically, FNMA/FHLMC now require 30% equity in the existing home about to be rented for the lender to be able to use rent to offset the previous housing debt. FHA requires 25% equity. If the equity requirements are not met then the conventional borrowers must qualify for both housing payments and have 6 month reserves on both payments. With FHA the borrower must still qualify for both payments but the reserve requirements are not required. No credit for rent will be given to either investor.

If the equity is met then a copy of a 12 month lease is required prior to closing the new loan and deposit must be deposited into the borrower's account and verified.

Your thoughts and feedback on this topic are greatly appreciated. Please feel free to post your comments.

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