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2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
2011 Fannie Mae and FHA Guidelines:  Implications for Condos
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2011 Fannie Mae and FHA Guidelines: Implications for Condos

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  • 1. FANNIE  MAE  &  FHA   REGULATIONS   :  I M P L I C A T I O N S   F O R   C O N D O M I N I U M   OREST TOMASELLI, CEO, NATIONAL CONDO ADVISORS NATIONALCONDOADVISORS.COM
  • 2. OVERVIEW   The  History  of  Condo:  Fannie  Mae,  FHA,  and  Lenders   Fannie  Mae  &  FHA  Today    PERS    CPM    DELRAP/HRAP   Top  5  Challenges  for  Condo  Developments   PorHolio  Lenders   Industry  PredicKons  
  • 3. 1990-­‐2000s   FANNIE  MAE:  A  HISTORY    1990s:    Tighter  guidelines  with  presale  requirements   •  Loans  below  presale  were  originated  through  porHolio  lenders    2000-­‐2008:  Agencies  began  to  loosen  condo  standards.   OriginaKng  loans  focused  more  on  the  credit  rather  than   collateral   •  Loosening  condo  standards  started  with  O/O  80%  CLTVs  and  gradually   expanded   •  At  the  height  95%  CLTV  loans  were  originated  with  liYle  to  no  review  of  the   condominium  elements2000-­‐2008:  Agencies  began  to  loosen  condo   •  Most  major  lenders  had  waivers  allowing  even  more  flexibility  
  • 4. 2000-­‐2008   LENDER  HISTORY     No  presale  requirement     Commercial  space  allowance  up  to  50%     Landleases  rarely  invesKgated  outside  of  the  term     CompleKon  of  common  elements  or  addiKonal  buildings  rarely  considered     Very  liYle  concern  regarding  conversions  or  current  renters     Condos  in  resort  areas  rarely  invesKgated  outside  of  glaring  condotel  elements     HOA  budgets  and  financials  rarely  ever  reviewed     No  Doc,  Stated  Income,  NIVA,  100%  financing,  credit  scores  down  to  580,  etc…     Buyer  credit  docs  valid  for  up  to  one  year  
  • 5. FANNIE  MAE:  START  OF  CHANGE     Announcement  7-­‐18  in  November  2007  began   major  changes  for  condo  approval   •     FNMA  reKred  the  1028  process   •     Removed  the  ability  for  new  condos  to  use  Limited  Review   •     Put  the  emphasis  of  new  condo  review  on  FNMA  CPM             •     Provided  20%  commercial  space  requirement   •     Pushed  responsibility  to  the  lender   •     Major  lenders  sKll  had  their  waivers  in  place  
  • 6. FANNIE  MAE:  START  OF  CHANGE     Announcement  8-­‐13  in  December  2008  created   more  thorough  implementaKon  of  stringent   guidelines        Increased  presale  to  70%          FNMA  re-­‐instated  1028  process  now  called  PERS        Created  a  stronger  reliance  on  FNMA  systems  (CPM  and  PERS)        Marked  the  beginning  of  more  stringency  for  conversions,   commercial  space,  and  budgets        Marked  the  end  to  most  major  lender’s  waivers        Mandated  all  new  Florida  condos  sent  to  PERS        Began  higher  scruKny  of  condos  in  resort  areas  
  • 7. 2009   FHA:  A  HISTORY     Mortgagee  LeYer  2009  46A&B   •     Created  the  DELRAP/HRAP  process   •     Spot  loans  eliminated   •     30%  presale  for  new  condos   •     Allowed  right  of  first  refusal   •     10  yr  warranty  not  be  required  with  CO  and  building    permits   •     Condo  conversions  will  not  have  to  wait  1  year  for    eligibility   •     Provided  25%  commercial  space  requirement   •   10%  line  item  for  reserves  
  • 8. 2011   FHA:  A  HISTORY     11-­‐22  Mortgagee  LeYer  Guide   •  Time  limits  on  30%  presale   •  All  conversions  less  than  2  years  old  to  be  approved  via  HRAP  and    requires  a  reserve  study  with  50%  presale  requirement   •  More  flexibility  for  sponsor  ownership  during  conversion   •  More  stringent  review  for  projects  involved  with  aucKon,  BK,  deed-­‐in-­‐  lieu,  asset  sale,  and  receivership   •  More  stringent  review  of  HOA  budget  and  financials    
  • 9. .   New   CONDO  APPROVAL  OPTIONS  Condominiums   TODAY    CPM:  Lender  Delegated  Automated  UW.  Capability  to  reach   51%  presale.    Lender  Full  Review    PERS  Submission:  UKlized  many  Kmes  for  excepKons    (rent   regulaKon,  excessive  commercial  space,  etc..)  or  markeKng   purposes.  Mandatory  for  Florida  project.  Cost  for  submission    FHA/VA  Review:    DELRAP  or  HRAP    PorHolio  Lenders  
  • 10. .   Established   CONDO  APPROVAL  OPTIONS  Condominiums   TODAY   • Limited  Review  (FNMA)   • Any  opKons  listed  for  new  condominiums    
  • 11. TOP  5  CHALLENGES  FOR  CONDOS  1.    Fannie  Mae  Legal  Requirements     By-­‐law  revisions       Unit  owner  vote  requirements  
  • 12. TOP  5  CHALLENGES  FOR  CONDOS  2.  Non  Gut  Rehab  Conversions     Established  vs.  Non  Established     Mandatory  reserve  studies  for  newly  converted     5  years  of  repair  cost  in  reserve  fund  
  • 13. TOP  5  CHALLENGES  FOR  CONDOS  3.  Reserve  Requirements     Departure  from  the  Special  Assessment     10%  Line  item  within  the  budget     Ongoing  contribuKon  
  • 14. TOP  5  CHALLENGES  FOR  CONDOS  4.  Commercial  Space     Fannie  Mae:  above  20%  -­‐trigger     FHA:    above  25%  -­‐  cannot  be  approved     Condo  hotel:    prevalence  
  • 15. TOP  5  CHALLENGES  FOR  CONDOS  5.  LiVgaVon     Trigger  for  Fannie  Mae  PERS  and  FHA  HRAP  submission     ConstrucKon  deficiency       Slip  and  fall  
  • 16. PORTFOLIO  LENDERS   Terms  olen  not  as  compeKKve:   •  Higher  down  payment  requirements,  interest  rates,  credit  score   requirements   PotenKal  downsides:   •  Usually  not  designed  for  LMI  buyers   •  Not  always  reliable  for  long  term.   •  PotenKal  probability  to  be  “adversely  selected”   •  Buyers  not  always  comfortable  with  unknown  sources  for  funding   •  Media  has  convinced  many  people  to  look  for  FNMA  approval  and   adequate  presale  requirements    
  • 17. INDUSTRY  PREDICTIONS   Lenders  will  conKnue  to  become  more  knowledgeable  through   necessity      More  buy-­‐backs    Desire  to  lend  to  certain  clientele   Some  lenders  to  selecKvely  choose  to  porHolio    Presale  being  primary  driving  factor    Elements  that  would  cause  FNMA  to  never  approve  are  less  likely    Credit  profile  to  be  significant  component   Less  flexibility  through  FNMA  and  HUD    Financial  review  to  become  a  key  component  for  reviews  
  • 18. QUESTIONS/COMMENTS?   *NaKonal  Condo  Advisors,  LLC  is  not  a  law  firm.    None  of  the  guidance  or  advice   contained  within  should  be  considered  or  construed  as  legal  advice  from  either  NCA   or  any  of  its  employees.    We  recommend  you  consult  with  your  aYorney  regarding   the  informaKon  provided  within.  

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