New guidelines will axe many condos from Fannie, Freddie, FHA loans

The New York Times’ Lynnley Browning reports on a Sword of Damocles hanging over many condo projects, whose units will not be able to sell with loans that have backing from the GSEs or the FHA, thanks to new, stricter guidelines effective in weeks. Browning writes that GSE-backed loans will only be available if less than 15% of the project’s residents are delinquent on their mortgage payments; and where condo associations have created significant reserves. The FHA meanwhile, “requires that at least 50 percent of a building’s units belong to owners who occupy their units, and that no more than 10 percent be owned by a single investor. The agency requires that a homeowners’ association set aside 10 percent of its budget for maintenance and capital expenditures.” For new buildings, the FHA requires that 30% of units be sold before it will back any home loans. Harsh.
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