Starting August 31, 2010, Fannie Mae, the government-backed mortgage giant, has announced it will be tightening its lending requirements for the interest-only loans and adjustable rate mortgages. It will also set new requirements that borrowers of the interest-only loans have sufficient cash to make the mortgage payments and other housing expenses for at least 24 months, as well as own a credit score of at least 720 points. They also stated that they will no longer fund the so-called balloon mortgages as too many people saw their mortgages swell to unmanageable heights, which caused them to lose their homes when they were unable to either pay or refinance to come up with the huge payment.

The past few years has seen many potential home buyers qualifying with little to nothing down, entitling them to own homes they simply could not afford. When the great recession hit, many of these homeowners were suddenly unable to meet their monthly financial obligations, which resulted in them either struggling to make their mortgage payments or ended with them being forced to completely abandon and walk away from their homes altogether. To get a Fannie Mae interest-only mortgage after August 31, a home buyer will have to make a 30 per cent down payment of the sale price.

For adjustable mortgage rates, the company will only buy those whose borrowers can afford the payments even if the loans initial interest rates were the rate plus two percentage points or the maximum interest rate, also known as the cap rate. So if your loan started at a 5 per cent rate and hit the cap rate of 6 per cent, you have to prove you can afford to keep up the payments at the six per cent rate.

Marianne Sullivan of the Single Family Credit Policy and Risk Management at Fannie Mae pointed out "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. These policy changes reflect our intention to continue providing liquidity to different market segments by ensuring that support for ARM products remains in appropriate circumstances".

Fannie does not issue the mortgages themselves. Instead, they buy them from lenders but few lenders will issue loans these days unless they can sell them to Fannie Mae. If the recession had a similar affect on you and you are currently suffering a bad credit score from it, there are many private lending institutions that can help. Getting a debt consolidation loan is an easy way to get your credit back on track.