DISCLAIMER: This information is presented to provide an overview of Fannie Mae’s condo guideline changes. For specific information and questions, please consult with your mortgage loan officer. I am not a mortgage loan officer.
On Friday I posted a link to breaking news on my Miami City Diggs fanpage on Facebook that Fannie Mae announced that they were going to ease condo mortgage restrictions.
The article published by Florida Association of Realtors noted that:
Fannie Mae announced yesterday that it would comprehensively review hundreds of condominium projects in Florida. Through a new “Special Approval” designation, Fannie hopes to streamline mortgage approvals for projects that don’t currently fit Fannie Mae guidelines even though they present limited risk to the company.
published on FAR click here to see the full article
In this market, this is good news to start off the new year… why?
When we start working with new buyers the most challenging part of the pre-buying process is explaining to our buyers that if they are purchasing a property and need financing; unfortunately not all of the properties listed for sale, will be properties that they will be eligible to buy. I just looked up in the MLS the most recent closing data of condos sold in Miami Beach for 2009. There were 1560 properties sold and 1095 of those were purchased with cash. Now that doesn’t mean that all of these were units/buildings didn’t qualify for financing, however it is a telling sign of this market.
Breaking it down…
Let’s assume that you want to buy a Miami Beach condo and you come to me with a pre-approval letter from your lender. However, just because you are pre-approved doesn’t mean that the building that you want to purchase a unit in is approved for lending.
Due to the hardships that our market has faced over the last few years, Fannie Mae has gotten very strict on their lending restrictions and they have have created a set of guidelines that lenders must go by in order to approve a unit in a building before backing a loan. This means that if the building doesn’t meet these criteria, most often the loan will not be approved.
According to Fannie Mae, the guidelines can be modified for condo projects on a case-by-case basis. Therefore, these guidelines may not apply to all condo projects. These are some examples of what may be considered:
- No more than 15% of a condo project units can be more than 30 days delinquent on HOA dues. This is an existing guideline that is now being applied to new condo projects. The calculation was also changed from being 15% of HOA fee payments to 15% of total units.
- Fidelity insurance will be required for condos with 20 or more units, ensuring that homeowner association funds are protected. Presently, this requirement applies to new projects and is now being extended to include established condos.
- A requirement that borrowers must now obtain a condo-owners insurance policy unless the master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condo-owners policy, known as an HO-6 policy, covers personal property, personal liability, and the physical unit from the studs and in. Many policies also include special assessment coverage or the option to include a special assessment coverage rider.
- No more than 10% of a project can be owned by a single entity.
- No more than 20% of a project can consist of non-residential space.
- The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.
So what does this mean now?
Note the above criteria and add in the announcement last week from Fannie Mae that they “would comprehensively review hundreds of condominium projects in Florida. Through a new “Special Approval” designation, Fannie hopes to streamline mortgage approvals for projects that don’t currently fit Fannie Mae guidelines even though they present limited risk to the company.” quoted from FAR article
If you want to see all of the FAQ pertaining to this new announcement click here.
This means that many previous buildings that were not eligible for certain financing based on previous restrictions, will now have a new opportunity for review. Thus a better chance for non-cash buyers to purchase in some of these buildings and in general more buildings that will may be eligible for financing.
from Fannie Mae’s site: Special Approval Designation for Established Florida Condominium Projects from 01/04/09
I have only listed buildings from the areas that we work.
To see the full list click here.
Miami Beach:
360 Condominium A & B
Harbour House
Mirador 1000 & 1200
Roney Palace
The Grandview Palace
The Michelle Condominium
Miami:
Blue
Charter Club
Cite
Latitude on the River
The Club at Brickell Bay Plaza
The Grand
The Yorker
This is really good news for non-cash buyers and hopefully it will open up more buying opportunities for them. Now more than ever buyers need to be sure they are working with professionals (lenders and Realtors) who know this market inside and out.
Thanks to Marc Halpern at Halpern & Associates for providing me with these details. Marc Halpern is associated with the Keller Williams Miami Beach office, he knows our market and he comes highly recommended.
Marc Halpern
Halpern & Associates Mortgage Corporation
1680 Michigan Ave #1001
Miami Beach, FL 33139
O) 305-535-2230
F) 305-535-2231
C) 305-992-4325
