Fannie & Freddie - Easing Condo Requirements?
As we have previously addressed, this past year has seen increased changes to Fannie Mae and Freddie Mac's condo requirements policy. With the main issue being new increased standards in their new definition of warrantable and non-warrantable condos (in other words, loan that they will or will not guarantee).
As a result, recently lawmakers have come out and said that they want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery.
In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from the previous 51 percent threshold. With Freddie Mac following suit recently as well.
In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.
The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos.
In addition, Weiner said the rules have "had a real chill on the ability to get these condos sold," at a time when prices of condos have fallen enough to attract potential buyers.
In addition to the 70 percent sales threshold, Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble.
Now, the ball is in the court of Fannie and Freddie who are said to be preparing a response to the lawmakers. Whether this will actually lead to any changes is yet to be seen, but we will certainly pass on any developments as they occur.
For more information on home purchase loan or refinance programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
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