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By Kerry Smith<\/div><\/div>\n

Fannie and Freddie will no longer fund condo loans in high-rent vacation areas. Bankers say entire complexes, even with few rentals, may be ineligible for financing.<\/span><\/span><\/p>\n<\/div>\n

WASHINGTON \u2013 A new financing rule has tightened the requirements for condominium financing in heavy vacation areas. Entire condo complexes may be ruled unqualified, making it more difficult for homebuyers to secure a loan.<\/span><\/span><\/p>\n

The rules apply to loans that banks plan to sell to Fannie Mae and Freddie Mac, which hold more than half of all U.S. mortgages. Banks that want to sell a loan to either of the two \u2013 a common occurrence because it allows those banks to then originate more mortgages \u2013 must adhere to the new rules.<\/span><\/span><\/p>\n

For Fannie Mae, the rule is already in effect; for Freddie Mac, it will go into effect next month.<\/span><\/span><\/p>\n

Fannie and Freddie\u2019s core mission is to encourage homeownership, and the rule tightening is intended to cut down on loans in vacation areas that often have more renters generally and short-term renters specifically as the Trump Administration tries to shrink its role in housing.<\/span><\/span><\/p>\n

\u201cWe\u2019re concerned that access to credit could be limited for whole projects or condo buildings, which could affect not just second-home buyers, but some primary homebuyers across the country,\u201d says Ken Fears, a senior policy adviser at the National Association of Realtors\u00ae in The Wall Street Journal.<\/span><\/span><\/p>\n

According to Fannie Mae, it\u2019s not a rule change so much as a clarification. However, that clarification focuses on the eligibility of complete condo projects rather than particular units. For Realtors and buyers, that means the residents of certain complexes may find that fewer buyers can afford a purchase if they can\u2019t easily secure a mortgage loan.<\/span><\/span><\/p>\n

Many of the details remain unclear, but it targets \u201ccondotels,\u201d which often have extra amenities and are run by some type of central management \u2013 and individual owners who often advertise their unit for rent on sites like Airbnb.<\/span><\/span><\/p>\n

It\u2019s unclear how any specific condominium complex will be identified as a condotel, but a Fannie Mae spokesperson says \u201cindividual units advertised by their owners on home-sharing platforms does not, by itself, mean the project is a condotel.\u201d<\/span><\/span><\/p>\n

Bankers now say the tighter requirements are having an impact on second-home sales, according to the Wall Street Journal. They\u2019re \u201cdriving up interest rates on new loans and limiting the availability of 30-year mortgages on such units.\u201d<\/span><\/span><\/p>\n

\u201cUntil there is more clarity from the agencies, all mortgage bankers are shutting off the valve on condo loans right now,\u201d says Rob Henger, director of mortgage banking at FirstBank Mortgage, a Nashville, Tenn.-based bank.<\/span><\/span><\/p>\n

It\u2019s also unclear how many potential condo loans will be affected. Fannie and Freddie back about half of all U.S. mortgages, and condo loans are 7%-10% of those loans, according to the Federal Housing Finance Agency (FHFA). But not all loans would be impacted, and a lot depends on how many condo complexes near beaches or resort areas will be identified a condotels and off-limits for loans.<\/span><\/span><\/p>\n

The Wall Street Journal cited a Virginia condominium complex as an example. The Sanctuary at False Cape Condominium Association in Virginia Beach, Va., says Fannie Mae informed it in late December that its 248 units no longer qualified for financing. When asked why, President Terry Suit says Fannie Mae \u201cwouldn\u2019t discuss its rejection with the association\u2019s representatives.\u201d<\/span><\/span><\/p>\n

Source: Andrew Ackerman, The Wall Street Journal<\/span><\/span><\/p>\n

\u00a9 2021 Florida Realtors\u00ae<\/span><\/span><\/p>\n<\/div><\/div>\n

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\nAuthor: kerrys<\/p>\n","protected":false},"excerpt":{"rendered":"