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  1. Freddie Mac Grants Reprieve to Rules on Florida Condos

    By Robert Hyder on April 5, 2010

    Freddie Mac Grants Reprieve to Rules on Florida Condos
    Freddie Mac, one of the nation’s two largest government-sponsored enterprises (GSE), revealed last week that they will loosen specific guidelines that have made it increasingly difficult for borrowers to obtain a mortgage loan on a condominium in Florida. The modification will undoubtedly make it easier for many Florida condo owners to refinance or sell their units.

    When Freddie Mac and sister company Fannie Mae tightened the guidelines on condos last year, condo owners were left in a vulnerable position, even if they or a potential buyer had impeccable credit. As financing options were reduced, additional restrictions were increased. For example, condo complexes with a high concentration of non-owner occupied condo units were eliminated from consideration for mortgage loans. Additionally, if a number of other condo owners were delinquent on their association dues, the other owners within the complex – regardless of credit – were penalized.

    Due to a large number of complaints by professionals in the housing industry, Freddie Mac announced they will grant a reprieve for some of more stringent rules for a year, but only for condo owners who already possess a mortgage loan backed by Freddie Mac. It is the widespread belief within the housing industry that the lending rules associated with condos have put an unfair disadvantage on condo owners, making it increasingly difficult to find qualified borrowers. The latest move will not add further risk to Freddie Mac’s portfolio as they will simply be trading one mortgage loan for another in their holdings.

    Previously, Fannie Mae had announced it would allow exceptions to its stringent condo rules on a case-by-case basis, provided the condo complex met certain, specific lending criteria. Although Freddie Mac’s move is more user-friendly for condo owners, it is much more of a bold move than Fannie Mae’s announcement in January.

    Robert Hyder

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    Category: Condominium

  2. Connecticut Office of Condominium Ombudsman Proposed by Attorney General Richard Blumenthal

    1 By Robert Hyder on February 19, 2010

    Connecticut Office of Condominium Ombudsman Proposed by Attorney General Richard Blumenthal

    During testimony presented to the General Law Committee of the Connecticut General Assembly, Connecticut Attorney General Richard Blumenthal recommend the creation of an Office of Condominium Ombudsman for the benefit of owners of Connecticut condominium units. Prompted by hundreds of recent complaints by condominium owners, Blumenthal is proposing the formation of a self-funded commission to review complaints by condominium owners over accused violations by condominium associations.

    Blumenthal suggests the ombudsman would review claims against condo associations by condo owners, then conduct hearings, if necessary, to resolve the issues and ensure condo bylaws and Connecticut state laws are upheld. Blumenthal’s proposal recommends that  a condo unit owner and the association first attempt to come to a resolution before the condo unit owner seeks support from the ombudsman.

    In a prepared statement, Blumenthal conveyed to the General Law Committee, “A Condominium Ombudsman would provide help to outmatched, overwhelmed unit owners who are fighting for their basic rights under our condominium laws. … Many of the complaints received by my office concern failures by association boards of directors to follow basic governance principles such as adopting an annual budget with notice to the unit owners, holding fair elections for the board of directors, providing key financial information about the association, and fairly imposing association fines. … Some of these complaints are based on deliberate indifference by association boards to association bylaws or state condominium laws – or a lack of full understanding of condominium association responsibilities.”

    The Attorney General’s proposal would be funded through an annual assessment of $4 per condo unit in Connecticut. With 240,000 condo units statewide, the assessment would yield $960,000 annually. In addition, a filing fee of $35 would be required by the complainant, with another $35 filing fee to be paid by the condo association, per dispute. The filing fee would be similar to the fee required when filing a complaint in small claims court. If the Office of Condominium Ombudsman receives 500 complaints in a year, it would yield an additional $35,000. Finally, Blumenthal’s plan would increase the filing fee for condominium managers to $400 biennially, rather than the existing $100 annual fee.  With 300 registered condominium managers in Connecticut, an additional $120,000 would be generated every two years instead of just $30,000 each year.

    Blumenthal’s legislation to create the condominium ombudsman has a great deal of merit. Existing laws impose specific responsibilities on condo association boards while establishing undeniable rights to condo unit owners. However, the current laws are unfair to condo owners, and it’s evident why. If a condo unit owner has a dispute with the condo association, the unit owner must hire an attorney at their own expense while the condo association defends itself using association funds. Ironically, the funds the condo association uses to defend itself are raised through assessment fees levied on the unit owners. Consequently, the assessment fees paid by the unit owners are used to defend the condo association in grievances brought on by the unit owners themselves. In essence, the unit owners are paying the legal expenses incurred on both sides of the issue. If the legislation becomes law, the ombudsman would be permitted to impose a monetary penalty of a maximum of $200 for any deliberate violation.

    –Robert Hyder

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    Category: Condominium

  3. FHA Condo Changes Good for Buyers

    By Robert Hyder on December 8, 2009

    FHA Condo Changes Good for Buyers

    Yesterday, the Federal Housing Administration (FHA) rolled out a new policy aimed at helping condo buyers in their search for a financially sound condominium complex. However, critics believe some of the new rule changes implemented by FHA will make it more difficult for builders to transfer new condo complexes. For example, the new FHA rules call for condo associations to deposit 10% of their annual budget into a reserve account to be used strictly for repairs and overall maintenance. A threshold of 10% is a significant figure when considering condo complexes with relatively few units.

    If FHA dictates mortgage loan approval only in buildings in which the condo association has 10% of their annual budget deposited, it will certainly protect the buyers even further because mortgage lenders will more carefully scrutinize condo complexes in which they are willing to lend. The new guidelines set forth by FHA will ensure that condo buyers are purchasing a unit in which the complex is financially sound. The new FHA condo changes are intended to prevent defaults on condo projects from rising.

    Additionally, FHA officials have said loans will not be approved for condos that have an excess of 15% of units more than one month late with assessments. Furthermore, FHA will regulate the maximum percentage of units owned by a single investor to 10%.

    FHA mortgage loans are extremely popular, and their popularity continues to surge during these turbulent economic times. While FHA constitutes approximately 30% of all mortgage originations in the United States, it has also fallen below the federal law mandating at least a 2% reserve ratio. Currently at .53%, FHA continues to tighten their belt.

    The U.S. Department of Housing and Urban Development (HUD) is now considering some considerable changes to their program in which borrowers will be obligated to bring more funds (5%) to the table than currently expected (3.5%) to qualify for an FHA mortgage loan. In all, the changes put in place by FHA to further scrutinize condo complexes, in addition to borrowers overall credit worthiness, will help FHA manage and mitigate risk, which will ultimately help in continuing the stabilization of the housing market.

    If a 5% down payment is not possible for someone looking to purchase, then waiting until January will restrict any mortgage options even further as FHA will unveil their new guidelines in more detail at that point. The combination of extremely low current mortgage rates and the $8,000 first-time homebuyer tax credit, or the $6,500 “move up” homebuyer tax credit, indicates the time is now.

    –Robert Hyder

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    Category: Condominium, FHA, Mortgage Rate Trends and Analysis

  4. FHA Condo Approval

    By Robert Hyder on October 6, 2009

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    If you’re looking to purchase a condo and you’re in need of an FHA mortgage loan, there are a couple of steps to take that will ultimately save yourself some time, aggravation and disappointment. First and foremost, you should get your pre-approval certificate before you start condo shopping. Next, be sure to only look at condo complexes that are FHA approved. These two simple undertakings will be worth their weight in gold.

    A pre-approval certificate is a lender’s commitment to lend. Once a condo is found, the pre-approval certificate is as good as having the funds in your hand, thus letting the seller know you are a viable buyer. In addition, the pre-approval certificate will considerably improve your leverage when negotiating a sales price with the seller, and it will also allow you to close almost immediately after entering into a contract with the seller. Don’t be confused with a pre-qualification letter, as it is a step below a pre-approval certificate. A pre-qualification letter merely specifies the size of a monthly mortgage payment a borrower can manage to pay and is not a commitment to lend.

    The Federal Housing Administration (FHA) requires condo projects to be approved by both FHA and the U.S. Department of Housing and Urban Development (HUD). FHA and HUD do not allow any exceptions to this rule, so it is recommended that you click here for HUD’s online tool for locating FHA approved condos in your area of interest. Who knows, maybe you’ll find an FHA condo project you never knew existed.

    –Robert Hyder

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    Category: Condominium, FHA, Mortgage Rate Trends and Analysis

  5. Renting versus Owning: The Scales Are Tipping to Ownership

    By Robert Hyder on August 26, 2009

    rent-or-buy

    For most, the biggest part of the American dream is owning a home. For those Americans who are currently renting, the scales are beginning to balance and shift toward homeownership in the great debate of whether to rent or buy a home. Besides building equity for the future, the three major components that are tipping the scales in the favor of homeownership are the declining values of homes, historically low mortgage rates and the federal government’s $8,000 tax credit for first-time homebuyers.

    For an additional $221 (estimated per an Associated Press analysis of 45 metro areas for the first quarter of 2009), renters can buy their own home. With the gap between a median-priced home and a median rent down to $221 from $777 just three years ago, this realization could signify a quicker conclusion to the national housing crisis if renters start buying up available housing. Some areas of the country have an estimated gap of approximately $100.

    As home values have continued to decline over a two-year period, the timing couldn’t be better for renters to delve into the realm of homeownership. The National Association of Realtors recently reported that the median home price in the United States peaked in 2006 at just above $230,000. Today, the median home price has fallen over 25% to well below $175,000.

    If this weren’t enough, current mortgage rates are still hovering near historic lows. Federal Reserve Chairman Ben S. Bernanke recently stated that he expects current mortgage rates to remain “exceptionally low for an extended period.” But don’t wait too long, as rates unexpectedly skyrocketed last month, but have since settled a bit.

    In addition to the historically low mortgage rates, first-time homebuyers can take advantage of the $8,000 federal tax credit. Only available until November 30, 2009, this tax credit can be utilized immediately, rather than waiting to file taxes at the beginning of 2010. It is important to note that this tax credit does not have to be repaid, unlike the tax credit from 2008 that was more comparable to an interest-free loan that must be repaid through tax returns over a 15-year period.

    So if you’re currently renting, don’t just throw your money away on rent. You owe it to yourself to at least take a look at the possibility of owning your own home.

    –Robert Hyder

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    Category: Adjustable Rate Mortgages, Condominium, Credit Score, Current Mortgage Rates, FHA, Fixed Rate Mortgages, General, Mortgage Broker/Banker, Mortgage Insurance, Mortgage Interest Rates, Mortgage Rate Trends and Analysis, Purchase, Stimulus

  6. Condo Purchase

    By BillSchettler on July 8, 2009

    Thinking of purchasing a condo? Purchasing a condo has recently become a great opportunity due to low mortgage interest rates.

    Purchasing a condominium has recently been a great opportunity due to low mortgage interest rates.

    There are some great deals to be had as this segment of the market has been among the hardest hit by the by the slump in real estate values nationwide. Now may be the time to consider a condo purchase as values begin to level off.

    That said, there are a few quirks when it comes to condo loans that will not come up when purchasing a single family home.  Fannie Mae and Freddie Mac have rules that are specific to this property type and you should keep these in mind when shopping for a condo purchase.

    Luckily, all of the answers to the questions needed to make an informed decision should be available to you through a quality realtor.  One of the first things when buying or refinancing a condominium is that you should ask is about the percentage of investor occupancy in the project as a whole.  Most lenders will require that this number be below 25% of total units in the project.  Also, you will often find that established projects are easier to obtain financing on than new construction projects.

    These are just a few pointers to help you get started.  It is a great idea to provide your mortgage professional with as much information as possible at the outset – this will always lead to a trouble free transaction.

    Again, purchasing a condo has recently become a great opportunity due to low mortgage interest rates. There are several mortgage products and programs, including FHA mortgage loans, to help borrowers purchase the condo of their dreams.

    Category: Condominium, Purchase
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