Fannie Targets Florida Condos With Tougher Lending Rules

The Miami Herald reports:

• Lending giant Fannie Mae is slapping tough new requirements on mortgages for Florida condos, moves that analysts believe will make it even more difficult to sell units in buildings already starved for residents and struggling financially.(1)

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• The company, wracked with financial problems of its own and in conservatorship with the federal government, said it singled out Florida after a review of its mortgage loans revealed record-high default and foreclosure rates among condo owners. It also cited the excessive number of condos listed for sale, which has driven down prices.

Among the new rules:

• No more than 15 percent of unit owners can be 30 days or more past due on association fees,
• For new condo buildings and condo conversions, at least 70 percent of units must have been sold or put under contract. That's up from 49 percent previously,
• Fannie will have to review condo buildings itself to make sure they meet Fannie requirements -- at the lender's expense. Before, Fannie relied on the lenders to perform these reviews.

For more, see New rules raise the bar for condo mortgages in Florida (In a move that will make it even more difficult to qualify for a condo loan, Fannie Mae is putting a host of new conditions on mortgages for condominiums in Florida).

In another new Fannie Mae rule, which reportedly applies nationwide, buyers qualifying for a mortgage loan conforming to Fannie Mae guidelines who fork up less than a 25% downpayment will be clipped for an additional 3/4% fee (see Fannie Mae's added fee to crunch condo buyers).

(1) According to the story, the new rules come at a time when condo buyers already face difficulties getting mortgages. Many banks over the past two years have dramatically pulled back on condo lending, requiring down payments of up to 40 percent in new buildings. Some lenders even have blacklisted condo buildings, citing a high risk of price declines and defaults.