Rental Restrictions and Freddie Mac?

All,

My HOA is in the "debate process" of enacting rental restrictions in our community. We recently had two owners (out of 20) move out and rent their houses within a couple months of each other, which pushes us over that 30% line that I keep hearing about that makes it harder to get a mortgage.

The one question that's been raised is whether or not the limits on mortgages if the community is more than 30% rentals applies to only condominiums, or to fee-simple homes governed by an HOA as well. While our units are connected and the HOA covers exterior maintenance in addition to common areas, we are legally not a condominium, so it's possible that our concerns here might not be well-founded if this rule is for condos only.

What we'd like to do is not put a hard limit on rentals, but to require that anyone renting their unit have been a resident for a minimum interval (one or two years) before being able to do so. The primary goal is to keep investors out, while keeping in mind the needs of people who may need to relocate but don't want to sell yet - this was the case with the two recent units in question. But if it turns out we're bound by the 30% rule we really don't have much choice but to be more restrictive.

Can anyone let me know one way or the other what Freddie Mac's rule actually is? Thanks!

[PDF] Section 1.13: Fannie Mae/Freddie Mac Condominium and PUD Approval ...File Format: PDF/Adobe Acrobat - View as HTML
provisions of the lease comply with Freddie Mac leasehold requirements. Reference: See “Leasehold Estates” in the “Occupancy and Property ...
www.stmpartners.com/manual/bro/general/condopud1.13.pdf - Similar pages

Try this link perhaps it may answer your questions.

Sorry to be a "smart-alec" but haven't I mentioned something about Mortgage companies having more of a stake in "Rental Restrictions"? After being told several times this isn't accurate, I find it ironic that this post would come up? Could it be true that rental restrictions have more to do with mortgage companies rules as well?

Okay, just had to put that out there. It is very true that Freddie Mac type loans do have rental restrictions in a HOA environment. What people don't realize about mortgages is that some require information to be shared with HUD. (Housing and Urban Development a FEDERAL office). There is a form with about 25 questions. The questions pertain to items such as: "Is it Fee-simple?, How many owners? How many non-paying owners? What is the income of the HOA?" Alot of "statistical" gathering data. This form is typically filled out when a loan has federal money programs attached. (FHA, Freddi Mac etc...) It has to be filled out prior to closing or the loan won't close. As the past president of a HOA, I was often called at the last minute to fill out this form prior to house closings. Many owners NEVER knew this occurred. I never saw the sellers or buyers.

There are factors about mortgages that many people don't even know about. You can't just get any type of loan you want. There are conventional loans with 20% down payments, first-time buyer loan programs, FHA loans, Freddie Mac for low-income, and special incentive loans for teachers or police officers. The HOA sometimes has to be "Rated" or approved to allow certain types of loans. Many gated communities would NEVER allow a Freddie Mac or possibly a FHA loan. They only want the "higher end" owners to come in. There are some areas where there are not many residents at all. The banks want to attract as many customers as they can so they open up more loan options. Our HOA/area did have some loans that were restricted due to a variety of factors.

The truth is that the mortgage companies are looking to "protect" their own investments. Ironically, it has the same issue with renters as HOA's do. They know renters ruin property values and destroy homes. They know because they own the homes. Who gets the foreclosed property in the end? Banks/mortgage companies. So it makes sense for a mortgage company like Freddie Mac to require a renter restriction. Freddie Mac loans are typically for people who have credit issues or lower incomes. The same one's that usually rent homes and cause issues. If they say that they don't want to loan money to a HOA that has over 30% rental, they can do that. Just means that Freddie Mac loans won't be available in that area until the rental limit comes back down. Which can be good news to the members of the HOA. It means that people with better credit and income levels can get in instead. Those loans may not have rental restrictions.

I've experienced this first hand. It's something I wouldn't expect the average homeowner to know about or to understand. All the tension and anxiety of buying a home overshadows many details like this. I learned about this from just being involved with the system. That's why I have been pretty persistent on my statements about rental restrictions. I apologize. It's just very difficult to explain. Just needed the right question. Thanks!

To BW: Why not check out your local lending companies/banks in the area to learn about their current and preferred mortgage lending policies--if there is any difference for them in lending to a buyer in an HMO or condo association.