|
|
|
|
|
|
| IHG Insurance (National Insurance Provider) |
| Providing Community Association Insurance for over 25 years: D&O Liability, Crime Products, Umbrella Coverage and Property Manager's Errors & Omissions Liability. |
|
| Reserve Fund Resources (National Reserve Planning Tools) |
| If you’re a BOD Member, Planner, or PM you’ll want our offerings. Many are FREE. Plus, there’s our “Essentials” book, and software to keep your funds healthy. Learn More… |
|
|
|
|
|
|
| You are not authorized to post a reply. |
|
|
| Author |
Messages |
|
JosephW
(Michigan)
Posts:753
 |
| 04/18/2008 5:55 AM |
|
This is not good! Let the board know and make sure you meet the guidelines.
In the Washington Post:
Credit squeeze could hurt condo sellers, buyers
By Ken Harney | Columnist
Published: 4/18/2008 12:22 AM
WASHINGTON -- If you own or plan to buy a condominium, an ominous new phase of the mortgage credit squeeze could be looming on your horizon.
As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit -- or even refinancing one you already own -- could prove tougher than you imagined.
For example, starting May 1, AIG United Guaranty, a major private mortgage insurer, no longer will write coverage on condominiums in hundreds of ZIP codes across the country that it designates as having "declining" market conditions. The ban is irrespective of applicants' credit scores, assets or equity stakes. Even in the healthiest real estate markets, United Guaranty will require buyers to put at least a 10 percent down payment into the deal, and will reject applications on units in condo projects where more than 30 percent of the owners are investors.
Buyers with 20 percent or larger down payments are not affected by the private mortgage insurance cutbacks. Some mortgage insurers continue to accept applications on condos in declining markets, but require down payments of at least 10 percent.
Fannie Mae, a dominant financing source for condominium projects, has rolled out new procedures that some lenders and mortgage brokers say could tighten up the availability of loans to condo purchasers in the coming months. Freddie Mac has issued similar new guidelines.
Under Fannie Mae's changes, most of the due-diligence research on condominium projects' key characteristics -- their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use, and percentage of units owned by investors -- must now be performed upfront by loan officers.
Not only is this time-consuming and costly, but under the new procedures, Fannie Mae expects the lender to warrant the accuracy of its research. Some condo project legal documents run into the hundreds of pages of text, yet lenders are supposed to take legal and financial responsibility for their accuracy.
"It's ridiculous," said Phil Sutcliffe, principal of Project Support Services of Lansdale, Pa, who helps put together condominium project financings for developers. Not only does this shift huge paperwork and time burdens on lenders and brokers -- who may not have staff resources to handle the extra work -- but also forces them to make "absolute judgments on things that are not absolute."
For instance, said Sutcliffe, the new Fannie guidance requires loan officers to make certain that at least 10 percent of a condominium project's current operating budget is reserved for "capital expenditures and deferred maintenance." Sutcliffe, who has analyzed condo project budgets for two decades, says there are no wiggle-room provisions in the guidance for "compensating factors," such as when part of the line-item reserves are for important but nonphysical expenditures such as insurance.
Some loan officers will simply look at the "reserves" item and, if it's below the 10 percent mark, might reject the whole building and refuse to take loan applications on individual condo units, according to Sutcliffe.
Fannie Mae spokeswoman Marilyn Kornfeld said the new procedures are designed to "protect borrowers and manage increased credit risk in the market." Freddie Mac spokesman Brad German acknowledged that the changes would make condo unit loans "more labor and paper intensive for the lender," but said weak sales, growing numbers of financially troubled projects, and declining property values made them necessary.
Jeff Lipes, president of Connecticut-based Family Choice Mortgage Corp., said the Fannie Mae changes combined with other retrenchments battering the condo market mean that when potential applicants inquire about getting a loan on a condo unit, "we really can't give them a definite answer" because it takes research to determine whether their building qualifies.
"Even if you had an 800 FICO score and 50 percent equity," said Lipes, "you still might not be able to get a condo loan" under certain circumstances. It all depends on whether the underlying project can pass the highly restrictive underwriting tests, whether it is in a declining market, and whether there is a lender "concentration" limit on it. Some large private mortgage lenders refuse to finance more than a set percentage of units in a single condo project to limit their exposure to possible losses.
Bruce A. Calabrese, president of Equitable Mortgage Corp. in Columbus, Ohio, said "everybody is really backing off condos" because of all the restrictions and changes. He said he personally owns two condo units -- one in Florida, another in Myrtle Beach, S.C. -- and even though he is in the mortgage industry, "I don't think I could refinance either of them right now if I tried."
|
|
Joseph West
Official HOATalk.com Sponsor
Community Associations Network, LLC
www.CommunityAssociations.net
*See legal notice below (end of page) or go to www.hoatalk.com/legal |
|
|
MC2
(Virginia)
Posts:26
|
| 04/18/2008 7:01 AM |
|
JosephW,
Thank you for the info. Here is the link for the depreciating value of real estate throughout the United States. AIG United Guaranty has developed a list of declining markets, updated on a quarterly basis. You can do a zip code search
https://www.ugcorp.com/decliningmarkets.html |
|
|
|
|
KarenT
(Washington)
Posts:57
|
| 04/18/2008 7:40 AM |
|
| MC2 - thanks for sharing this link! |
|
|
|
|
TracyT
(Maryland)
Posts:220
|
| 04/18/2008 9:02 AM |
|
Very interesting article, thanks. For the most part all this mortgage crisis stuff really keeps my head spinning . . . but what I found equally interesting was
"Under Fannie Mae's changes, most of the due-diligence research on condominium projects' key characteristics -- their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use, and percentage of units owned by investors -- must now be performed upfront by loan officers." Also, the discussions on reserve studies and budgets.
These topics are discussed here alot and over the past 2 legislation sessions, (here in MD) I've noticed several proposed bills addressing these issues that have been defeated due in part to who will pay, the HOA or developer.
If the lenders dont push back on this they will no doubt just pass the cost right on to the buyer. While this might help some buyers make better decisions it will make home buying nearly impossible for others, all while ensuring the COA governance is functional/accountable.
What a visous cycle! |
|
|
|
|
|
| You are not authorized to post a reply. |
|
|
General Legal Notice: The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com. Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship. Readers should not act upon this information without seeking professional counsel. HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional. HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice: (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.
Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)
|
|