Fannie Squeezes Condo Loan Requirements

The statistics detailing the carnage of the housing crisis is daunting and not for the faint of heart. Although single family improvements, in the form of houses, have been clobbered, the condo market is in shatters.

Although many condo projects, particularly those built as condos rather than apartment conversions, had a minimum percentage of available units which could be sold to investors, and clearly those in charge relaxed those requirements.

Now, with an incredible overhang of distressed (foreclosed on, short sale or pre-foreclosure) condo units for sale, values are stung with negative pricing pressures which could sink the most savvy investors, and almost all are "under water".

The only hope is for the existing inventory, now with prices that are quite affordable and attractive, to be burned off in the form of sales.

Enter Fannie Mae, or the Federal National Mortgage Association, which has installed new stricter guidelines on condo sales escalating the already monumental degree of difficulty in moving these properties.

Among the changes which will dramatically effect sales is that Fannie Mae is requiring that of a building's unit owners, no more than 15% may be delinquent on association fees as a condition of funding home loans to new buyers. That practically takes Fannie Mae off the table.

I own a condo, built as a condominium complex, in a centrally located area of southeast Orlando. The amount of building owners delinquent on association fees far exceeds 15%, and this well built complex is a leader in the area.

Most condo sales are cash only these days anyhow, but these requirements, along with a jump from 50% to 70% of the units as sold or under contract, has essentially eliminated Fannie Mae from the condo market. If the goal is to work off this inventory, this cannot be a welcomed development. One has to wonder why this move was made?