NEW LENDING RULES AFFECT CONDO MORTGAGES

In January, lending giant Fannie Mae enacted tough new requirements on mortgages for Florida condos, this information is particularly important to those of you who may be considering refinancing in order to take advantage of today’s low interest rates or seeking a potential purchaser for your condominium unit. Analysts believe that these changes will make it even more difficult to sell units in buildings already starved for residents and struggling financially.

These new standards apply only to Florida condo properties. Sweeping changes include requiring that no more than 15 percent of a building's unit owners be delinquent on association fees as a condition of funding home loans to new buyers.

Fannie Mae buys the majority of home loans from lenders, so it wields significant power in the making of mortgages. Fannie-backed loans generally offer the best rates and lowest down payments for borrowers.The company, wracked with financial problems of its own and in conservator-ship with the federal government, said it singled out Florida after a review of its mortgage loans revealed record-high default and foreclosure rates among condo owners. It also cited the excessive number of condos listed for sale, which has driven down prices.

The new rules come at a time when condo buyers already face difficulties getting mortgages. Many banks over the past two years have dramatically pulled back on condo lending, requiring down payments of up to 40 percent in new buildings. Some lenders even have blacklisted condo buildings, citing a high risk of price declines and defaults.

Fannie Mae's timing couldn't be worse as we are already mired in a housing depression. This is effectively going to make it much more difficult to qualify for a condo mortgage.

NEEDED TO QUALIFY

The new conditions include:

• No more than 15 percent of unit owners can be 30 days or more past due on association fees.

• New condominium developers have to assure that at least 70 percent of units have been sold or put under contract. That's up from 49 percent previously.

• Fannie Mae representatives will have to review condo buildings themselves to make sure they meet Fannie requirements, at the lender's expense. Previously, Fannie Mae relied on the lenders to perform these reviews.

Ultimately, qualified borrowers will benefit by knowing they are moving into a condo complex that is adequately funded and has plenty of reserves, allowing them to predict their monthly expenses.

WHAT CAN I DO?

The best advice for a condo owner to prepare for a refinance or potential sale is to attend your Board of Director meetings and become more involved in your condominium association. You probably can’t change the mortgage rules, but as a condo owner, you possess the great ability to affect the saleability of your community. Below are some great questions to ask of your elected Board.

• How many owners are delinquent in fees?
• What is our policy for collections?
• How much money is delinquent?
• Are our reserve accounts fully funded?
• Who oversees our operating budget?

By volunteering for your elected board or a committee, you become part of the solution. Remember, "You" are a condo association member and chances are, your association needs you!

Send any comments to: The Condo Communicator