Under tow in the urban market.

We are starting to see challenges in the urban market that we haven't seen for sometime. The are several challenges arising but I would like to talk about one. Now before I continue let me say this is not true of all products types and areas. This is really project by project depending on when it was marketed, built (or converted) and sold. As a by product of the housing boom in 2005 and all the speculative buying, investors are now upside down in certain developments along with home owners who bought at the peak. These properties most likely will go down the path of a potential foreclosure, short sale or hopefully (for primary homeowners) a loan modification. As far as the foreclosure and short sale properties, owners stop making their payments thus stop making their HOA fee payments (this includes the banks who take the property back). What happens is the HOA delinquencies go beyond the 15% max delinquency rate required by Fannie/Freddie. In return, no bank will loan on the property since they can't sell the loan on the secondary market to Fannie/Freddie thus making the loan illiquid. This in turn causing the problem to exacerbate. For more insight on this challenge, properties that have this issue and more 'under tow' issues, give us a call. Thanks! M.