In today’s Wall Street Journal, there is a report that two Congressmen are calling on Fannie Mae and Freddie Mac “to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing market recovery.”
Freddie Mac and Fannie May will no longer guarantee mortgage loans to new certain new construction condominium projects, where greater than 15% of owners are delinquent, or where one owner owns more than 10% of units. These lawmakers hope to relax these new regulations. However, until that happens, there are a few things associations can do to ensure that potential buyers can still get a loan for their unit. First, boards should continue to implement and enforce a strong collections policy to keep delinquencies low. This was a main topic at the recent Financial Crisis seminar presented in April by Kaman & Cusimano, LLC. While keeping delinquencies low in a difficult market can often be challenging, the alternative could be catastrophic for the community. Second, boards often ask if they should consider reversing a no leasing amendment to the Condominium Declaration. Absent critical and unique circumstances, our answer continues to be no.
By doing these things, an association can successfully navigate through the Fannie Mae and Freddie Mac regulations so that potential owners may still get financing for their units.
The Wall Street Journal article is available online on a free basis for a limited time here: