If you have read my blog before, you know that most of my posts are about the legal side of our business and my work as an expert witness in real estate litigation. This one is not.
You would think that the music would be loud enough for congress to hear now that billions have been lost by hard working folks when the banks crashed and burned over the mortgage scandals. You remember - making loans to be people who couldn't qualify. And, accepting "no doc" loans with little or no downpayment. And, the banks flinched under congressional pressure and agreed to this madness.
Now, Barney Frank is at it again. After the crash, Fannie and Freddie made up stronger rules on lending to Homeowner Association property. They are very logical and make good business sense. Frank is arguing that they are restrictive and are slowing housing recovery. Also, remember; Fannie and Freddie don't make loans. They guarantee them. So, if these are such good deals, banks would make the loan right? No! You and I wound up guaranteeing the bailed out bank loans.
Here are the new rules. Do you think they are too strong:
- Sold units: No loan unless 70% of project sold. The old rule was 50%. This is a problem in that many developers who couldn't sell their units, let the property go into foreclosure. Then the rest of the unsold units dumped on the maket by the bank at REO prices, destroying any equity the current owners had.
- Unpaid dues: New rule is that no more than 15% of owners have not paid their dues. If there was ever a red flag about a potential foreclosure coming is when the owners aren't paying their dues. The expenses keep going, meaning that the remainder of the owners have to pick up the slack.
- % of ownership: New rule is that no more than 10% of units can be owned by one person. You can see where this leads. With 10% or more of the units owned by one guy, the whole project can crash if that owner defaults or goes bankrupt.
Yes, if we want to be selfish, these rules hurt real estate sales. But, it is time for our industry to stand up for what is right for our country, not just right for the politico. If you agree, email your congress persons and senators and tell them what you think (unfortunately, we have no one represeting us in the Senate in California).
Here is email for your congress representative: https://writerep.house.gov/writerep/welcome.shtml
Here is email for your Senators: http://www.senate.gov/general/contact_information/senators_cfm.cfm