Guidelines for condos could slow market

While it may seem simple to buy a condominium unit, government guidelines are actually making it harder to get mortgage financing reports the New York Times.

Stricter guidelines that govern which buildings are approved for conventional mortgages — rolled out by three government agencies in stages since December 2008 — are locking out thousands of buildings nationwide. States like Florida and Arizona are especially hard hit; mortgage brokers say that some buildings in the New York area have also been affected.

The guidelines and approvals come from Fannie Mae, the buyer of home mortgages; Freddie Mac, its smaller competitor; and the Federal Housing Administration, which insures loans. The rules were meant to help strengthen their balance sheets as they faced a surge of loan defaults in the condo market.

Condominium associations are being called upon more frequently to open their books to Fannie Mae, Freddie Mac and the FHA. 

For instance:

Condo associations are required to set aside 10 percent of their budgets for maintenance and “reserves”; and new developments are ineligible for Fannie-backed financing unless 70 percent of their units have sold or are under contract (the threshold used to be 51 percent). Freddie Mac adopted similar guidelines last year.

 Waivers are available but none are sure things.  Fannie Mae does have a website that lists approvals as does FHA.

Read the full report, Stricter Lending Guidelines for Condos

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