HOAleader.com - Tip of the Week - June 9, 2023
Published: Fri, 06/09/23
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HOAleader.com - Tip of the Week - June 9, 2023
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In this week's tip, we discuss the ever-growing number of condos banned from receiving federal financing due to Fannie Mae and Freddie Mac lists that one of our experts, Kelly Richardson, says are like the double-secret probation so hilarious in the movie "Animal House."
But this secret blackballing is no joke for communities ensnared in it.
As we reported in May 2022, federal entities tightened condo lending requirements in response to the Champlain Towers collapse. The intent was to ensure that condos were structurally sound and that condos that didn't meet the new standards would be pushed into making upgrades. When condos comply, funding for buyers of properties in the condo remains easier to access.
Since then, however, both Fannie Mae and Freddie Mac have expanded their lists of condo communities for which they won't back financing—which means less-expensive financing for everyday condo purchases isn't available.
Today, Freddie Mac's list tags more than 1,400 condos and co-ops, up from about 900 before the new standards took effect, reports Orest Tomaselli, president of project review at Philadelphia-based Condo-Tek. He sees the list monthly through his work with lenders nationwide and confirms that the list kept by Fannie Mae is confidential. Tomaselli says he's never seen an HOA on a list.
"It boils down to four to five major issues," says Tomaselli. "There are other things that could put a condo on the list, but these are the big ones." Here's the first factor he's finding:
1. The absence of a 10 percent reserve line item in an operating budget. "For decades, many developments didn't put in 10 percent in their operating budget for reserves," explains Tomaselli. "They operated via special assessments or had a substantial amount of capital built in reserves and felt like they didn't need to collect 10 percent.
"There were several ways to still get a Fannie Mae mortgage even if you didn't have 10 percent reserve item in your budget," he notes. "Those have gone away. Fannie has locked down their policy on that even if a reserve study was in place from a professional engineer."
Discover all four—plus his advice for getting out of the federal doghouse—in our new article: https://www.hoaleader.com/members/4714.cfm
Best regards,
Matt Humphrey
President
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Click here for more:
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