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Cash In On the Condo Bust
But you have to be very, very careful. You want to make sure that the building has solid financial statements, they have reserves, enough insurances, etc. A lot of this is taken care of by the lender but make sure to consult a real estate expert and mortgage expert and get their thoughts on whatever you are trying to buy.
Fannie Mae’s News Release On Condo Changes
Date: January 7, 2010
Fannie Mae Launches “Special Approval” Designation to Support Florida Condo Market
Realtors Commend New Flexibility
WASHINGTON, DC – Fannie Mae announced today that it is undertaking a comprehensive review of hundreds of condominium projects in the state of Florida in an effort to allow additional projects to become Fannie Mae-eligible through a new “Special Approval” designation.
A dedicated team of six Fannie Mae professionals based in Florida is conducting a thorough examination of condominium projects across the state that may not currently meet Fannie Mae’s standard eligibility criteria and assessing specific criteria more closely, including occupancy, homeownership association dues, financial stability of the project and property condition. Projects deemed to be sufficiently stable following the closer examination are granted a “Special Approval” designation, meaning lenders can originate and deliver mortgage loans secured by units in these projects to Fannie Mae.
Fannie Mae has been granting exceptions to its condominium eligibility guidelines on a case-by-case basis when requested by lenders. The “Special Approval” designation streamlines the process for lenders and catalogues projects across the state that are Fannie Mae-eligible. Projects deemed eligible will be listed on www.eFannieMae.com as project reviews are completed, and qualified borrowers wishing to purchase units in these projects will be eligible for financing.
“This new initiative is geared toward providing maximum support for Florida’s distressed condo market as we continue to provide liquidity to the housing market more broadly,” said Karen Pallotta, Executive Vice President, Single Family Mortgage Business. “The state’s condo market has been particularly hard hit by the housing downturn and we’re working with the industry and our partners to do all we can to stabilize the market and help spur recovery.”
“NAR applauds Fannie Mae for taking this important step to make condo loans more readily available in Florida,” said Moe Veissi, National Association of Realtors® First Vice President and broker-owner of Veissi & Associates Inc. in Miami. “Our state is probably the hardest hit as far as the condo market is concerned, and Fannie Mae’s new effort to take a closer look at project eligibility could go a long way to putting projects back on a healthy financial track.”
“Special Approval” designations are effective for periods between 9 and 18 months, and lenders are required to confirm the project’s Special Approval designation on the date of the loan application. The Special Approval initiative is for established condominium projects only.
Florida Condo Loans Could Get Easier
And that’s not me saying it; it’s Fannie Mae who is. I certainly hope they do because every time I even hear the word “condo” I cringe since they have made it so difficult to get financing.
I did however write about something very similar back in June based on the article here from The South Florida Business Journal http://southflorida.bizjournals.com/southflorida/stories/2009/06/15/story4.html
The reason I bring this up is because the article below from today in the Sun Sentinel states “A team of six employees is reviewing hundreds of established condo projects statewide that may not meet Fannie Mae’s standard eligibility criteria for financing because of occupancy problems or high delinquency rates in homeowner association dues.”
I guess if I continually have to state “I am not a pessimist …” then maybe I am just in denial. Or, is it just that I continue to read good news and a lot of it doesn’t happen? You can be the judge.
FHA Condo Update
FHA cannot seem to make up their mind when it comes to their new condo rules. They were supposed to go into effect on October 1st, 2009, then changed to November 2nd, 2009, and now are pushing it back to December 7th, 2009. Here is what they had to say:
“Implementation of FHA’s new policy guidance for condominium project approval and condo unit financing will be delayed until December 7th 2009. The new guidance, to be issued within the next two weeks, will: 1) offer additional leniencies to address the difficult market conditions and 2) augment some portions of FHA Mortgagee Letter 2009-19, providing additional information and clarification.
Until the new guidance takes effect on December 7th, 2009 lenders may continue to use the Spot Loan Approval guidance issued in Mortgagee Letter 1996-41. Further, the site condo and manufactured housing condo project changes that have already been implemented are not affected by this delay.”
To read FHA Mortgagee Letters 1996-41 and 2009-19 please visit:
Condo-Hotel Problems
Buyers are trying to take developers to court arguing that security laws were violated. The article states that they have turned out to be based investments. Come on now, what property with the word condo hasn’t turned out to be a bad investment in the past few years. When prices were going up no one was complaining and developers couldn’t go back to buyers for more money. It’s a two way street people.
“Now, some buyers are arguing in court that purchasing a unit in a condo-hotel is similar to buying a stock, where the buyer is entirely reliant on the operational skills of management for any return. Therefore, they contend, the purchases should have been regulated by the Securities and Exchange Commission, which would force companies to issue a detailed prospectus and have agents licensed to sell both real estate and securities, a rare combination.”
Condominiums And Barney Frank
Barney Frank is trying to get Fannie Mae and Freddie Mac to be more lenient on condos. And although this article brings up the fact that he is the same person who may have contributed to the housing meltdown (along with many others) I feel as though he is right on this one. The current guidelines are so strict right now on condos that it is causing prices to drop even more than they should have. That is because if you cannot get financing in a condo project the only way to buy a unit in the building is cash at blow out prices, way below market value. We are especially feeling this in Broward and Miami-Dade Counties.
“Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to “roll the dice” in the name of affordable housing. That didn’t turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity — with your money. He and New York Representative Anthony Weiner have sent a letter to the heads of Fannie and Freddie exhorting them to lower lending standards for condo buyers.
You read that right. After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development.”
Buying A Condo
This article hits it right on the nose about buying a condo especially here in South Florida.
“Potential condominium buyers are facing a tough choice right now: new or used?
There are deals to be had on new condos, as developers heavily discount units to move inventory. But getting a mortgage is tough. Fannie Mae and Freddie Mac, the government-controlled mortgage companies, have put in place even tighter guidelines for making condo mortgages. That’s leading some developers to seek FHA approval for their buildings, as Wednesday’s WSJ story explains.
Used condos have their own financing issues. As some condo owners fall behind on mortgage payments, they’re also missing payments for condo association dues, which pushes more buildings to make up that debt by passing hefty special assessments on residents. Fannie Mae doesn’t purchase mortgages in buildings where more than 15% of owners are 30 days or more late on paying their condo dues. That means some owners can’t refinance or sell their units because their neighbors aren’t paying.”
http://blogs.wsj.com/developments/2009/06/18/anyone-want-to-buy-a-condo-anyone/
Condo’s Take On Lenders
This should come as no surprise but condo Boards are going after past due condo dues.
“As more condominium owners default on home loans, the amount of unpaid dues owed to condo associations is piling up. To collect the arrears, some condo boards have begun foreclosures on units already seized by banks. Banks that hold or service mortgages on which homeowners have defaulted don’t owe condo dues until the bank takes title of a property. In Florida, where judges must rule on foreclosures, it can take 18 months or longer from the time a homeowner stops making mortgage payments.”
Fannie Mae Condos In South Florida
Apparently you can get waivers through Fannie Mae’s “Project Eligibility Review Service.” This is good news however they are under staffed and waiting for the approval can be detrimental to a condo project.
http://southflorida.bizjournals.com/southflorida/stories/2009/06/15/story4.html
Should You Buy A Condo In This Market?
You certainly can but you will want to do your research first. The article below gives a good synopsis of what you should look at. I like how it talks about the newer buildings that aren’t completely sold. I think another thing to pay close attention to are the condo buildings built in the past 3 years that allowed a lot of speculators in and have a lot of delinquencies.
Although many, including myself, get frustrated with what condo buildings banks/lenders will approve, it actually protects you as the buyer too. I am sure the banks care more about themselves but at the same time it does help you stay away from a bad investment.
MillerOnMortgages
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