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FHFA Approves Expanded Loan to Value Ratios
On July 1st, The FHFA authorized 125% loan to value ratios on loans written by Fannie Mae and Freddie Mac, in an effort to expand the Home Affordable Refinance Propgram (HARP) to homeowners who are current on their mortgage payments from the present loan to value ration of 105 to 125%. These expanded refinance opportunities offer qualified borrowers whose mortgages are currently ownerd or guaranteed by Fannie Mae and Freddic Mac. People with qualifying loans will be allowed to refinance those loans according to the terms of the HARP established earlier this year.
This program is in part meant to encourage home owners to opt for mortgage terms amortized for less than 30 years to help them get back 'above water'.
FHA Guideline Changes….Coming to a Condo Development Near You
More change is in the air for developers of condo projects and for condo owners who desire to get approved for FHA Financing. The details of the changes coming can be found in the 2009-19 Mortgagee Letter on the HUD website issued 12-June. The FHA is annoucing profound changes to their condo approval process and the outright elimination of the Spot Approval Process. Lookout lenders, more burden, work and overall responsibility is coming your way, while full condo approval documentation and requirements will see a reduction. These changes will become effective 1-Oct. '09. Although, the ripple in the water will almost start to be flet immediately.
2 options for Lenders for condominium approval processing:
- HUD Review and Approval Process (HRAP).
- Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.
The processing options stated above will be applicable to condominium developments that are:
- Proposed/Under Construction;
- Existing Construction; or
- Conversions.
Eligible Projects:
The Condominium Project has been created and exists in full compliance with applicable State law requirements of the jurisdiction in which the Condominium Project is located, and with all other applicable laws and regulations.
Certain types of projects will be ineligible. For Instance:
- Condominium Hotel or “Condotels”
- Timeshares or segmented ownership projects
- Houseboat projects
- Multi-dwelling unit condominiums [i.e. more than one dwelling per condominium unit]
- All projects not deemed to be used primarily as residential
The major 'Negative" in these new guidelines is the the “Spot Loan Approval” process being elminated. The processes have been streamlined to allow for uncomplicated condominium project approvals eliminating the need to approve units on a “spot loan” basis,” according to HUD. Alomost certainly this new approval process will add more time to the approval of a Condo Project compared to the more immediate quick “Spot Approval” process.
Who will challenge the elimination of the Spot Loan Approval process? Realtors? NAR?
Priced to Sell, or NOT
It still amazes me that people just don't get it. Please, let me be CLEAR ~if you are trying to sell your home in this market, price it right or it simply won't sell.
Listing appointments have turned into more than the presentation of the good old days that included the marketing strategy that would be employed to sell the home, to first serving up a hearty dish of price reality. Now, there are certainly enough resources on the internet for sellers and buyers alike to educate themselves before testing the waters on either side of the transaction. Truila, MLS, Realtor websites, Realtor.com, and of course Zillow and its controversial Zestimate are just a few. With the millions of monthly visitors all of these marketplaces claim visit their sites and consume their content, you would think my job would be getting easier, not harder.
If your house has been on the market for awhile and is still on the market, it is clear that either you didn't listen to your realtor or your realtor didn't give you good information. Either way, the conclusion is obvious, YOU PRICED YOUR PROPERTY INCORRECTLY!
It stands to reason, with high inventory levels, more and more foreclosures and short sales coming on the market monthly, that reasonable pricing will peak interest, but unrealistic pricing will not benefit either party.
Educate yourself so that when you meet with a realtor you have realistic expectations. Keep in mind though, all the resources available on the web still won't be able to provide the most up to date market information. None of the other sources has all the data necessary. A realtor can provide your most up to date and complete market analysis.
Price them right folks! And if you can't sell, consider renting! It seems to have worked for the Treasury Secretary! I guess he missed my price it right rant! See his story here!
Condo Owners/ Buyers – Need to Know Information!
A friend of mine sent me the infromation below regarding condo financing. I thought it would be relevant to a lot of people. Here are some key things you NEED to know about condo financing.
LTV ‘s – Unfortunately, there is currently no PMI available on second home condos and my lender friend was not able to identify any bank or lender doing 2nd mortgages on them except in rare circumstances where the borrower has a strong relationship with a bank. Lenders are limited to 80% max on 2nd home condo financing right now. 75% financing gets buyers a slightly better interest rate. PMI is available on primary home condo purchases to 95% if the borrower meets FICO score requirements.
Condo questionnaires – Full condo review forms are required on primary home condos over 80% LTV, second home condos over 75% LTV and ALL investment condos. Lesser LTV’s are allowed to have a Limited Review where the lender calls and asks several key questions but the management company does not have to complete a full questionnaire.
Current pitfalls of the condo questionnaire ~
- Occupancy – If the condo is being purchased as an investment property, the occupancy status has to be at least 51% owner occupied /second home. If it is a primary purchase or a second home purchase, occupancy percentages are irrelevant. Foreclosure/bank owned properties should NOT be counted as investment properties on the condo docs so it would be prudent to double check with the management company if this ends up being an issue to make sure they are not including foreclosures and bank owned properties.
- Insurance – All condos with more than 20 units are required to show proof of Fidelity Bond coverage (this coverage insures against employee/board member dishonesty or theft). Most condo associations have this but some have had to add it which has caused closing delays.
- HO6 Insurance – The blanket policies for condos on hazard and flood generally just cover the structure and nothing on the interior of the condo. Borrowers are required to get interior “walls-in” policies know as HO6 policies equal to 20% or the appraised value of the condo. If condo value is $500,000, they need $100,000 worth of coverage for the inside and so on. Buyers – know this upfront so you are not surprised.
- Delinquent HOA Fees – Important information here, especially considering the market today ~ If more than 15% of the units in a condo are over 30 days delinquent on HOA fees, the property is considered non-warrantable by Fannie Mae guidelines. In a project with 50 units, having as little as 8 of them be more than 30 days delinquent can throw the loan out of Fannie Mae eligibility for financing. This has been huge over the last couple of months because the bank/asset managers are often not paying the regime fees on the properties they foreclose on and they only get paid once the property sells to a new owner. HINT – A Limited Review does not ask this question buyers can potentially avoid this obstacle by putting down a little more money on the property if it is a primary or a second home purchase and avoiding the full condo questionnaire.
Apparently condo financing issues are impacting purchases and those looking to refinance all over the state. What has been your experience? Tell us your story or add new information.
