HUGE news for would-be condo investors: Fannie Mae has finally changed the rule that has been strangling condo sales. From now on, when new investors apply for financing onÂ a condo unit, no longer will vacant and foreclosed condos be counted as non-owner occupied.
Until now, Fannie’s long-time policy has been to bar new investor loans in buildings where less than 51 percent of the condos are owned and occupied as principal residences or second homes. Under this rule, many condo communities struggledÂ to stay over 51% due to the high number of foreclosures, effectively only allowing cash sales to take place. This was because Fannie believed that there was a greater risk of default in projects that have high numbers of investor units, with absentee owners renting out their units. You don’t say!
They were correct of course, a fact that has been borne out in Orlando condo communities like Central Park in MetroWest – and I’ll be the first to admit that Fannie’s policy has hurt condo sales terribly. So why has FannieÂ now decided to walk straight into the gunfire?Â Does it have anything to do with that $700,000,000,000 bailout?
Anyway, under the revised policy – apparently requested by the National Association of Realtors in November – Ms. Mae says it will now count bank-ownedÂ condos that are listed for sale, but are not rented, as if they are owner-occupied when computing the 51 percent ratio. This shouldÂ mean more loansÂ and therefore more condo sales. Yay.
In buildings that still don’t meet the 51% occupancy test,Â F.M. says it will allow lenders to ask for waivers by submitting financial information about the project for individual review by Fannie. (Sounds like a complete roll-over to me.)
However, Fannie is keeping its boot firmly on the nose of strugeling developers and still won’t finance condo projects where it believes there are “excessive” sale or financing concessions being offered to buyers. These might include condo communities where developers pay purchasers’ mortgages for long periods of time, or refund condo fees, taxes or HOA dues. This is because Fanie believes that such concessions distort the underlying economics of projects, and may attract buyers who can’t really afford the full payments. Never…
Anyway, in a nutshell, if you were looking to pick up a foreclosure at a condo community but couldn’t get a loan due to the investor ratio – you might want to try again.
So jump backÂ in – the water’s great (and leverage is already back in fashion). And we have reams and reams of condos like this going for a steal. Just make sure you read the condo foreclosures post (below) before you give us a call!~
(See ‘comments’ link for update)