Double Whammy Affecting Condominiums
August 27th, 2009 categories: Fairfield, Ohio
FHA and Fannie Mae are slamming the condo market.
For areas with an abundance of condominiums, like Fairfield, the new rulings could have a negative impact.
FHA Mortgages:
In the past FHA approved a complex as meeting their standards- and future borrowers using FHA mortgages did not have to jump through hoops to get a loan approved. Beginning around October 1st of this year- FHA condo approvals issued prior to 10/1/2008 are being eliminated and condos projects will have to be recertified with HUD. What this means to buyers and sellers – longer time to closing while the complex is reviewed and approved. If the condominium complex cannot obtain FHA approval- sellers will have to rely on a much smaller pool of buyers who qualify for conventional mortgages or cash buyers.
Fannie Mae:
Add to the potential crunch of FHA approvals, Fannie Mae announced a decision to tighten its lending rules to condominium buyers. Under the new rules, if a condo association has more than 15% of its units delinquent over a month- Fannie Mae is not guaranteeing the loan. And owner occupied units must be at 70% instead of 51%. For complexes not meeting the guidelines lenders (banks, credit unions…) can’t provide a loan unless they plan on holding onto it forever. Most lenders do not operate this way.
It will probably take some time for the jittery condo market to normalize – in the mean time condo buyers and sellers are pinned in a ring refereed by FHA and Fannie Mae.
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