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Bring cash, Fannie Mae, condos

OK, I admit it. I haven't sold a condo in awhile, so I wasn't aware of the FNMA changes that went into effect November 15, 2007. At least, not until today. My buyer has been in escrow for almost 45 days on a cute little condo here in the mountains. I guess the condo association wasn't aware that they were no longer on Fannie Mae's approved list either. And come to find out, neither did the mortgage broker or the big name lender... No one had brought it up until last night in a cryptic message from the mortgage broker saying the lender's legal department was now reviewing the association's declarations page. Didn't know why until this morning. I get a call from the manager of the association telling me he's getting a "flurry" of requests for more information from a variety of people. He's not sure how he's going to supply an attorney's opinion letter that has been requested, since the association "doesn't have an attorney". He forwards me copies of the emails. Then the mortgage broker forwards me more emails. Many phone calls, emails and paperwork review later reveals that the association bylaws did not have the "approved" language and they would need to amend their bylaws to make them compliant or any future buyers in the complex would need a lender who wasn't going to sell the loan or to bring cash. We have found a lender for the buyer that isn't going to sell the loan and they tell us they can close in 14 days. Wish me luck!

I did talk to the president of the board and he was very concerned about the other owners that might want to sell in the complex and wants to make sure that they change the bylaws to be compliant as soon as possible. Has anyone else out there had experience with this? Other than telling the board they should have an attorney review the language before they submit it to the membership for vote, is there anything else they should be aware of? Your help is greatly appreciated!

Posted by Tamara Perlman, Lake Tahoe Truckee CA Real Estate on 06/21/2008 01:51 AM

Comments (19)

fannie mae, fannie mae changes, condos, approved condo lists, association approved list, condo board

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19 Comments on Bring cash, Fannie Mae, condos

JUN

2008

Wow, what a frustration for everyone involved. Had the association changed their bylaws since they received Fannie Mae approval originally?

I would assume they had had approval for many years. The complex is over 30 years old and in the past had sold 20+ units per year. I think they revised the bylaws in 2000-01. But the language that FNMA is now requiring seems to put associations in a tough place--hence the recommendation that they have an attorney review... though I assume the other associations that are now compliant had to do it and have reviews too.

Sounds like more and more pressure on mortgage brokers. The, a mortgage broker, surely isn't going to hold a loan in their portfolio. They don't have a portfolio. The investor probably isn't going to fund a loan that they can't sell.

I am of the opinion that the lobbying arms of major direct lenders are behind many of these new regs that are diluting the value of condos. I'm not sure that these regs are to protect any entity except the direct lenders.

There for a while the guidelines were almost changing daily. I have my UW look the up when application is made. But they miss them too sometimes.

Laura--

At least I'm not the only one! I don't know that they even looked until after the UW had signed off everything else. Then they sent it to their legal department. Which was days after we were supposed to have funding... We kept getting stalled out and lots of excuses were made about being understaffed, people out of town, etc, etc...

Lenn--

Yes, it looks like protection for the big boys. As near as I could understand the legalese, if there were a fire or other major damage to the building in which the lender held a mortgage, they are to be in first position for payment from the insurance company--I don't know how that would work as the association would need the funds to rebuild/repair the property. Perhaps I just mis-understood the language...

Tamara,

We have not used a Fannie approved list for YEARS, spot approvals are pretty easy and it is just a 1 page form. The big issues are the percentage of tenants that occupy the building, if there is one person that owns more than 10% and are all common areas complete... (they are the ones that bite you most) there are a few others with litigation, Association fees being late etc, but less common problems)

FHA uses an almost identical form, so dont worry about an FHA list either, if you can do it conventionally you should be OK FHA as well.

Rob

Tamara, I just ran into the first one like yours this week. I turned over all the requests to the list agent and he's running with it. A lot more leg work in the future it appears.

Duane--

The condo association manager told me it could be 6-12 months to get the attorney, the board and then the membership to all agree on amending the bylaws. The president of the board told me he wanted to a "special" amendment that hopefully could be approved sooner. Since there are a number of properties on the market in the complex. I will continue to check with him, but for now, my buyer found a different loan product.

Tamara, good, glad all is going in the right direction, frustrating no doubt.

Robert--

Thanks for the info. We had the one page with no red flags. I had another lender tell me yesterday that the new language only applied to projects that weren't finished or still had some developer ownership. Then he told me his UW would still need a condo cert. The broker that came thru with a program said that it was unusual that the broker would have tried to go thru that particular lender who would require that the FNMA guidelines be followed to the letter.

Countrywide doesn't have a big presence here in Truckee, but I will certainly keep them in mind for future condo loans!

Thanks Duane--it was an eight hour marathon yesterday getting clarifications and communicating with everyone. Since I have a listing there too, it will be worth it!

Tamara, like you have all the extra time in the world to recreate the wheel, things are changing daily these days.

This is true, so even if the board amended bylaws, by the time they got it done, the language needed could change 3+ times!

And if I'm doing an open where no one shows, it's OK to visit the rain, right?

Tamara, you put as huge smile on my face, I won't tell if you don't, LOL.

Thanks Duane--kinda like Vegas, huh? Besides, I'm networking!

Tamara, LOL, what happens in The Rain, stays in The Rain!

JUN

2008

Woah... I haven't known about this change either... I guess I'd better review this as I've received a sudden flurry of interests for condos here.

Hi Chuck--

I'd definitely check into it. As you can see from above, Robert at Countrywide says they don't use the FNMA guidelines. But it seems most of the major lenders do, with the research we did. Also, if the buyers are interested in specific complexes, check with their hoa's to see if they have attorney opinion letters or if their bylaws incorporate the language FNMA requires...

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