The rules for lenders that seek Fannie Mae money have just been changed and much to the detriment of condo owners. Freddie Mac has just issued similar restrictive lending practices regarding loans to new buyers of condos.
Loan officers will now be responsible for the due diligence required before these two quasi-public agencies will get on board a new loan for a condo.
Some of The New Fannie Mae Guidelines
Condo's have legal documentation that are the guidelines for how owners interact with the community and with the HOA. They also determine what the HOA can and cannot do. How it manages the condominium. These CCR's can be in the hundreds of pages.
Lenders Must Warranty the Following:
1. The HOA operating budget - how much is spent and accounted for in the operation of all common areas.
2. The adequacy of the operating budget. Does the HOA have enough funding to adequately maintain the property. How much of the HOA budget is allocated for maintenance and upkeep? What percentage of the budget is set aside for major building issues?
3. How many late pays are there?
4. How much of the property is allocated for commercial use
These guidelines will place labor and time constraints on the lender that will cause them to move away from these kind of loans. Additionally, it puts the lender in a position of Warranteeing the financial s and that will cause many to simply not lend to condo buyers or find it cost effective to consider condo refi's.
I understand that the condo market has been risky for lenders, especially in Nevada, California and Florida but this this is another nail in the coffin of a market segment that is being hard hit.
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