Fannie Mae is becoming more strict with their loan requirements as they deal with how much money condo associations keep in reserve.  Every condo association is unique, and they cover a number of services for their residents. Some cover trash, water, even cable tv in some cases. Most associations cover the maintenance of the exterior of the units; paint, roof repairs, gutters, landscaping, and community shared resources like pools and playgrounds.

Condo Association Finances

Recently Fannie Mae has been scrutinizing the financial strength of these associations before they will make a loan. Fannie Mae wants these associations to have at least 10% of their total annual budget in reserve. The lender wants to make sure that in the case of a weather emergency such as hail or a wind storm, the association has the funds to make the repairs to their investment. Remember – the lender owns the home and the homeowner makes mortgage payments to buy it back from the lender.

If you live in a condo or townhouse community that has a condo association you should make sure that they are keeping their reserve fund fully funded. Attend the meetings and ask for copies of the budget so you are always informed.  Keeping your association on the right fiscal track will help make your community more attractive to buyers and to the lenders who will finance their purchase.

If you are interested in buying or selling a condominium in Cincinnati please call me at 513.518.1140

As a Cincinnati real estate agent I have a responsibility to guide buyers through the application process, ensuring that they provide accurate information on all of the documents. Because the lenders are re-checking the information if any of it changes it could cause the loan to go through another round of underwriting. To protect my buyers I am advising them to work very closely with their lenders to keep their information current.

Move forward to today, Fall 2009, and condo buildings are selling out in 6-8 weeks … at $200 sqf.  Peter Zalewski, a real estate broker who runs the Condo Vultures, explains that the Miami Condo market’s price reset has sparked interest in Latin American and South American investors. They seem to be cash buyers and feel that the current prices are a relative bargain.

The challenge that is preventing more buyers form purchasing is that financing is very hard to obtain in these new construction condo buildings.  Fannie Mae and Freddie Mac are denying loan applications to well qualified purchasers simply because there is such an over-suply of units that reselling a unit could prove a dauting challenge.

The lesson we all need to learn here is that to sell real estate ANYWHERE you need to price it correctly for today’s market. If you are interested in a condo, or a home in the Cincinnati area contact me today!

The Making Home Affordable Program was created to assist homeowners whose home values have declined to the point where they may no longer have equity in their homes. So the homeowners have not be able to refinance their homes and take advantage of lower interest rates. In addition, many of these homeowners are also locked in to 3,5 or 7 year adjustable mortgage rates which will soon reset at higher rates. To try to assist these homeowners  the federal government started the Making Home Affordable Program. The purpose of the program is to stop the cycle of foreclosures and short sales and to provide homeowners who are in this position to have options to save their home and financial stability. This program has eligibility requirements that must be met.  For more information please visit the Making Home Affordable Website. This site  helps borrowers learn basic facts about mortgages, homeownership, and resources available, with more than 17.7 million page views in less than two months.

Fourteen servicers, including the five largest, have now signed contracts and begun modifications under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the program. The 14 participating servicers have extended offers on over 55,000 trial modifications and mailed out over 300,000 letters with information about trial modifications to borrowers.

There are four options for homeowners who are in this position:

1) Loan Modification- If the homeowner wants to try to keep their home, they can negotiate with the bank to try to come to agreeable terms. This is something that the homeowner can do themselves although there are professionals who will charge you a $1000 to assist with the process.

2) Short Sale- If you have 1 or 2 liens on the property this option can be available to you if your bank is willing to participate. If you have more than 2 liens it can be more difficult or not an option at all. Even if your property sells all deficiencies aren’t always forgiven so be sure to consult a realtor who specializes in short sales, a real estate attorney, and an accountant prior to making the decision to sell your property in a short sale.

3) Deed in Lieu of- Can only be used if there is 1 lien on the property. A hardship must exist, and the homeowner must provide a letter explaining the circumstances of the conditions of the hardship for bank review. Usually this option is exercised once a short sale has failed to unload the property. Essentially what happens is the homeowner signs the deed back to the bank, gives back the keys, and moves out of the property. Federal law does not allow the banks to come after the homeowner for deficiencies.

4) Sheriff’s sale- This is a last resort. Allowing your property to be foreclosed and be auctioned off on the courthouse steps can severely damage your credit and ability to obtain a Fannie or Freddie backed loan for a minimum of 7 years.

For more information on this topic please email me or call me and I can refer you to my colleagues who specialize in this area of Cincinnati real estate.

The LA Times explains that a buyer with a FICO score between 700 and 720 will pay an extra three-quarters of a point. Even someone with a 739 FICO will get dinged with a quarter-point add-on. Applicants buying a condominium that cannot come up with a 25% down payment will be hit with a three-quarter point add-on penalty, no matter how high their credit score, simply because they are not buying a traditional detached, stand-alone home. Buyers of duplexes, in which one unit is owner-occupied and the other is rented, will be charged a flat 1% add-on from Fannie, even if they’ve got FICO scores above 800 and make 50% down payments.

There is still one option for buyers looking to secure a loan without these penalties – FHA loans. Currently in Cincinnati, and across Hamilton County, the FHA loan limit is $337,500 and the down payment requirement is 3.5%.  FHA loans have different restrictions such as PMI insurance that need to be paid for by the borrower. For more information on how you can leverage an FHA loan, especially in lieu of the tightening loan regulations, contact me at Alison.Moss@comey.com.

• Primary residence, “cash out” refinances are limited to 85% loan-to-value
• Second home, cash out refinances are limited to 75% loan-to-value
• Investment properties cannot be refinanced without a 25% equity position

The changes are designed to lower the exposure to lenders, and to make sure home owners have more of stake in their own homes. We are advising our clients who will be looking for homes to make thier move before the changes take effect.