Condominium Lending Gets Tougher And Tougher
We stand by our claim that it is a great time to be a buyer and a great time to buy (there is a difference), but we did also say “there are a multitude of hurdles you will face with regards to financing”, and this change in Fannie’s Condominium lending is surely one of them, will definitely not bode well for our SOMA condo market, and is totally unfortunate. One day we’re up, the other we’re down. What’s a market supposed to do!? Good thing San Francisco is not just high rise condos…
Just as a flood of new condominiums are scheduled to hit the housing market this year, Fannie Mae has added restrictions making it more difficult for developers to sell their units.
The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won’t back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity.
The new policy became effective March 1, and most lenders have started to implement Fannie’s guidelines….
Still, condo developers say the rules may hasten the failure of countless buildings across the country and seem to be at odds with federal efforts designed to speed along a housing-market recovery. “These buildings are just in purgatory. This new requirement is the straw that’s going to break the back of a lot of projects,” says Norman Radow, an Atlanta real-estate investor who works with lenders to rescue distressed condo complexes. “It’s a weight being tied to a drowning industry.”
Moreover, Fannie and Freddie are both set to increase fees on condo buyers next month. Buyers without at least a 25% down payment will have to pay closing-cost fees equal to 0.75% of their loan, regardless of the borrower’s credit score. The companies say these fees are necessary to protect against higher default rates.
The changes come as cities brace for a new flood of condo supply. Reis Inc., a New York-based real-estate firm, estimates that 93,000 new condo units will be completed this year, a 28% increase in new inventory from last year. More than 12,000 units will be completed in New York and northern New Jersey by year’s end. Chicago will add 5,500 units, Seattle has 3,000 units coming online, and Los Angeles is readying 2,600 units, according to estimates provided by Reis.
–Fannie Tightens Its Conditions for Backing Condo Mortgages [Wall Street Journal]