As of March 1, Fannie Mae instituted new restrictions that will make it more difficult for condo developers to sell their units. Under the new Fannie restrictions, the government-sponsored enterprise has stopped guaranteeing mortgages in condo buildings where fewer than 70 percent of the units have been sold, which is up from 51 percent previously. In addition, Fannie announced that it will no longer back loans for sales in buildings where 15 percent of current owners are delinquent on association fees or where more than 10 percent of units are owned by a single-entity.
Fannie believes the implementation of new restrictions will protect borrowers from risky investments and safeguard taxpayers (who now own Fannie Mae and Freddie Mac under the government’s conservatorship) from losing money on unstable developments.
Condo developers, however, are concerned that the new restrictions may lead to the early failure of projects and that the now-effective rules will slow down the recovery of the nation’s housing markets.
As of press time, Freddie has yet to adopt Fannie’s new guidelines, though most lenders have already implemented the restrictions. In the coming month, both GSEs are expected to increase fees on condo buyers, meaning that buyers without at least a 25 percent down payment will have to pay closing-cost fees equal to 0.75 percent of their loan, regardless of the borrower's credit score. Fannie and Freddie contend that these raised fees are necessary to protect against higher default rates.
The above article was found at the Appraisal Institutes's website via http://www.appraisalinstitute.org/ano/current.aspx?volume=10&numbr=5/6#6901
