Is Your Condo Blacklisted By Lenders?

Beach Fanatic

Oct 2, '08 · 8:41 PM9,9991

Also termed nonwarrantable, there are a variety of reasons why a building would be branded as ineligible for lending. Most factors reflect criteria set by Fannie Mae and Freddie Mac, but some are based on lenders? internal risk-based criteria.

Loans that meet the standards of Fannie Mae [Federal National Mortgage Association] and Freddie Mac [Federal Home Mortgage Corp.] are eligible to be sold in the secondary market to the two government-sponsored but privately owned mortgage finance giants. For that reason, lenders have always found it safer to issue loans in projects that are eligible to be sold to those companies.

A building may be deemed ?nonwarrantable? if a large number of its condo units are owned by investors. About 70 percent of the building must be owner-occupied for it to be considered suitable to be sold to Fannie or Freddie.

The number of pre-sales, litigation involving developers, condo boards, vendors or unit owners; condo association financial problems and many other factors are also used to measure the risk.

If your condo building is blacklisted, you may not even know it. :bang:

TheCompleteSheep is in hand with several of these eligible/ineligble lists, and particularly properties on those lists, but ewe is not a squealer. ;-)

Replies

SoWal Insider

Oct 4, '08 · 7:04 PM#27

I have Suntrust's list. This one you posted is 9 pgs long for approved condos nationwide. Mine is 1722 pages long (inc the 9.5% of unwarrantable).

Suntrust's list are condos they have warranted for the Agencies. It is not all exclusive for all condos. I linked Suntrust's list since they are a major Lender in FL. Anyone can go to Fannie Mae/ Freddie Mac/FHA web sites and search for approved condos. Here is the link for FHA. I'll look for FNMA and Freddie link later or google their main web page and search for approved projects.

If a project is on the approved list, it means that a Bank does not need to submit they warranted the condos that are listed, or only has to do a limited review. If the condo is not on the list, that does not mean the condo is unwarrantable. The underwriter at the Bank reviews the condo questionnaire obtained by the Bank and if it meets the requirements, then they get a warranty. FYI- FNMA will not entertain any new condos in FL, meaning newly built.

Non Warrantable Condos - these are condominiums that are not eligible to be sold to Fannie Mae or Freddie Mac because they DO NOT fit into one of the following three classes:

CLASS I

1. Developers control of the homeowners association has been turned over to the condo owners
2. Project is not subject to additional phasing or add-ons which have not yet been completed
3. All common elements and amenities must be fully installed, completed and in operation
4. 70% of all units in the entire development must have been sold and or legally obligated to close
5. 70% of all units in the entire development must have been sold to owner occupants

CLASS II

1. Recent or current condominium conversions (from apartments)
2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years
3. Project is not subject to phasing or add-ons which have not yet been completed
4. All common elements and amenities are fully installed, completed and in operation
5. 70% of the units in the entire development must have been sold and/or legally obligated to close
6. 70% of the units in the entire development must have been sold to owner occupants
7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessments

CLASS III

1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year
2. Project is not subject to phasing or add-ons
3. All common amenities are fully installed, completed, and in operation
4. 90% of the units have been sold (owner-occupancy of at least 60%)

A CONDO QUESTIONNAIRE MUST BE COMPLETED BY THE MANAGEMENT TO DETERMINE PROJECT ELIGIBILITYFor those who are considering purchasing Non-Warrantable condos, they should expect to pay higher interest rates on their mortgage loans. Because FNMA would not purchase mortgages secured by non-warrantable condominiums, many banks consider these condos to be more risky, and thus increase the interest rate accordingly.
Depending on the loan program you select, be prepared to have a down payment on the home. Most lenders will only offer low Loan-to-Value financing on non-warrantable condos.
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I also really like this condo questionnnaire - it asks most of the questions I would be asking as new buyer. There is no reason why, if you are interested in buying a condo, that the Managing Agent should not complete this for you. They may charge a fee, and if I had my eye on a condo, I would ask the seller to pay for it. The fees I have seen are quite negligible. I can't see why they wouldn't since it shows you have a solid interest and not being a tire kicker.

Additional questions I would be asking:
1) How many unit owners are 60, 90, 120 days delinquent in assessments
2) How many in foreclosure?
3) Does the Association have a reserve fund and how much?

As far as spending an application fee to a Bank/Broker/Lender, a fool is soon parted with his/her money. If you have your questionnaire in tow, there is no reason why the Lender can not send it to their underwriting team or call the Condo division of a Bank. The larger Banks have Condo specialists. If anyone tells you you have to pay a fee to apply and find out if 1) the condo is unwarrantable and 2) they do or don't offer mortgages on unwarrantable condos, then run, don't walk, to the next Lender.

Beach FanaticAuthor

Oct 4, '08 · 7:43 PM#28

Originally Posted by TheSheep

"Deserve" is a cruel shoe, Ms. Shelly.

:roll: Oh please...with all the red flags that are flying warning of the greed, fraud and corruption that has been (and continues to be) going on in Real Estate "investment"...if they don't get it by now, then yes--they pretty much deserve to be taken to the cleaners--culling the herd, you might say.

Tsk. :bicycle: A hard edge you have, Ms. Shilly; a black 'n white look at a world mostly grey I would say. Perhaps someone ran over your kitten in your early years? This would explain your lack of compassion married to noticeable aggression for those who made honest investments and received less or more than what they deserved.

Perhaps your anger is centered on my new relationship with Joshua, who has an obvious shine for me. :wub:

Either of ways, when one uses such a broad paint brush on the "them there" world as you, the painter is painted as well. :cry:

Edited Oct 4, '08 · 7:44 PM

Beach Lover

Oct 6, '08 · 8:06 AM#29

Mango gave us some very good posting. Any condo sales contract will be accompanied by an addendum that will state that at seller's expense the buyer will be provided a questionaire from the association as well as the condo docs and current year-end financials. Here is the addendum:

http://tinyurl.com/48dny8

The buyer can kill the deal within 3 days after receiving.

I have seen associations state within the questionaire that they have no knowledge of percentage of renters within the building and answer n/a.

Have you touched on the lender's criteria for condotels? If determined to be a condotel some lenders will approve a loan but at a much higher interest rate. Factors include any one of the following:
1. One night rent available.
2. Can book online.
3. Onsite food delivery.
4. Check in front desk.

SWGB

Oct 6, '08 · 8:20 PM#30

Sheep do ewer research. SHELLY is a guy. ;-)

Beach FanaticAuthor

Oct 6, '08 · 10:17 PM#31

Sheep do ewer research. SHELLY is a guy. ;-)

Sheep poke fun.

SoWal Insider

Oct 6, '08 · 10:56 PM#32

Mango gave us some very good posting. Any condo sales contract will be accompanied by an addendum that will state that at seller's expense the buyer will be provided a questionaire from the association as well as the condo docs and current year-end financials. Here is the addendum:

http://tinyurl.com/48dny8

The buyer can kill the deal within 3 days after receiving.

I have seen associations state within the questionaire that they have no knowledge of percentage of renters within the building and answer n/a.

Have you touched on the lender's criteria for condotels? If determined to be a condotel some lenders will approve a loan but at a much higher interest rate. Factors include any one of the following:
1. One night rent available.
2. Can book online.
3. Onsite food delivery.
4. Check in front desk.

Thanks, Joe. I was aware there was a review period, but couldn't remember the law for FL. However, if I were trying to sell a condo, especially in this current environment, I would have those docs readily available to a potential buyer who asks for them prior to contracts being drawn. Why waste everyone's time involved? and if the buyer decides something doesn't bode well with them, do they have the right to renegotiate terms within that three days? It seems to me to be an inefficient way of doing business if the buyer only has the ability to walk after 3 days. Just my two cents.

The guidelines for condotels were listed in the above links I posted, as well as PUDS. (Planned Urban Communities) A PUD you own your footprint (land) but share Association amenities. For all practical purposes they are treated as single family homes for underwriting purposes. I have had some Banks ask for a questionnaire because the appraiser notes it is a PUD, but some haven't.
Very few Banks offer mortgages for condotels. At least in my neck of the woods. It's not very common. I'm sure they are out there, but I imagine would be few and far between because of their likeness to timeshares.

Beach Fanatic

Oct 8, '08 · 10:37 PM#33

Does there have to be any disclosure of environmental issues within a condo complex or building? I know there has to be disclosure in single family homes, or in the exact unit, but what about the project as a whole?

In the questions ask on the link, it only refers to environmental issues regarding state laws, etc. There are many issues that have to be disclosed that are not governed by state laws.

Do these items blacklist a property?

Beach FanaticAuthor

Oct 9, '08 · 11:00 AM#34

Full disclosure is required by law by both the Offending Party(s) and the Affected Party(s) for U.S. EPA regulation violations which may result in blacklisting. It is not unusual for Lenders to hire environmental watchdog firms to dogwatch the environmental public notices and report to the Lender dogginess.