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TylerH1
(California)
Posts:3
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| 06/24/2008 1:40 PM |
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Greetings,
As the Treasurer of our HOA, I've been asked to sift through the requirements for the Fannie Mae "07-18" announcement on: Lender Delegation of Project Review Processes and Related Changes for Condominiums, Cooperatives, and Planned Unit Developments (PUDs).
I have 2 clarification questions, where I would appreciate any guidance or expertise.
1. Ownership - No single entity (the same individual, investor group, partnership, or corporation) may own more than 10 percent of the total units in the project.
*Question* - Our project has only 5 units. Each owner therefore has 20% ownership, which is out of compliance of this regulation. Does anyone know of an exemption or how we can comply? This seems to be an issue for small projects.
2. Insurance deductible - Lenders must review the homeowners’ association actual budget to determine that it is adequate (i.e., it includes allocations for line items pertinent to the type of condominium), provides for the funding of replacement reserves for capital expenditures and deferred maintenance (at least 10 percent of the budget), and provides adequate funding for insurance deductible amounts.
*Question* - I believe our CC&R states that each unit owner is responsible for covering their share of the deductible, and we have therefore never budgeted this item in our operating or reserve fund. Has anyone had to change that, or how have you handled this requirement?
Thanks for your opinions and expertise in advance.
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MaryA1
(Arizona)
Posts:2248
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| 06/24/2008 6:56 PM |
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Tyler,
Can you provide a web address so we can take a look at the rule? But, I'm thinking these rules are for developers. |
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TylerH1
(California)
Posts:3
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| 06/25/2008 9:23 AM |
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Hi Mary and others,
Yes, here are some links for clarification on my original post:
The Fannie Mae information is here:
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0718.pdf
An article that talks about the impact on this and other policy changes affecting condos are here:
http://www.nuwireinvestor.com/articles/will-new-restrictions-crush-condo-market-51710.aspx
A more specific article on Condo Lending restrictions are here:
http://www.baltimoresun.com/business/realestate/bal-re.harney20apr20,0,2345831.story
I don't think this applies to just new projects, since there are requirements for lenders to perform due diligence on things like Reserves Allocations, dues delinquencies, etc. Although the burden is on the lender, this becomes a pass through burden to the HOA to provide documentation to support compliance with this, otherwise, it could affect the ability to sell a condo unit.
Have others seen this and complied? Am I worried about the wrong thing here?
Thanks |
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MaryA1
(Arizona)
Posts:2248
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| 06/25/2008 10:24 AM |
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Tyler,
Thx for the links. I read the articles and was surprised to learn this applies to refinancing and purchasing a condo. I've always heard lenders do look at the number of renters but I was not aware of all the other things. Although these guidelines apply specifically to areas with declining markets, it appears the condo market is getting really bad everywhere! Here's an excerpt from one of the articles:
"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 up front by loan officers."
Perhaps someone here who lives in a condo can be more specific on what the board should be doing to protect their investments.
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GeraldT4
Posts:932
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| 06/25/2008 10:35 AM |
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| TylerH - Regarding the ownership rule it means that if there are 100 units, one person cannot own more than 10 units. You are not out of compliance because one person doesn't own more than 1 unit correct? What I question about that rule is how Fannie Mae will deal its lending practices for new buyers when it comes to new developments. The developer owns, and is in control of the majority of the association for some time. Is Fannie Mae going to deny all mortgagors until those without a mortgage, or without the Fannie Mae restriction, can retain control? |
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KirkW1
(Texas)
Posts:1145
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| 06/25/2008 1:36 PM |
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If all five units are occupied by their owner, then you have 0% of them owned by investors. The home you live in is NOT an investment, it is your home. (Yes I know it will appreciate in value, but the government does not consider this an investment. Not do many financial planers since you would have to replace it with other arrangements to get your money out.) I would further point out that Fannie Mae doesn't consider the home you live in as investment property either.
Having said that, if you have one unit that is owned as an investment, then you are probably over the limit. I don't know what consideration is given if a person who previously lived in a unit then rents it because the market is slow. It might depend on if they keep it listed. |
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TylerH1
(California)
Posts:3
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| 06/25/2008 3:20 PM |
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Hi Kirk,
Thanks for your feedback. I guess I don't know where it says anything specific about "investors" owning 10%. The 07-18 announcement says:
"No single entity (the same individual, investor group, partnership, or corporation) may own more than 10 percent of the total units in the project."
As far as I can tell, it is unclear from this if it applies only to those who are are not living in the unit. Do you have any information you can share to clarify that this rule would only apply to investors who are non-tenants? Entity doesn't necessarily imply Investor. That would be welcome news, of course, if that were the case.
Regards, |
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GlenL
(Ohio)
Posts:1377
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| 06/25/2008 3:36 PM |
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| Tyler have you tried contacting Fannie Mae directly with your questions and concerns? |
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| You are not authorized to post a reply. |
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