Article: Buyers stymied by tough rules on condos

Last month I wrote about an article, featured in the Arizona Star, on buyers having difficulties purchasing in condo developments due to tough new mortgage lending restrictions. Over the weekend, the Miami Herald published an article on the very same subject.

New rules put in place by Fannie Mae, one of the two big American mortgage lenders, mean that if anyone wishes to arrange a loan to purchase a condo must have a deposit of at least 40%. Furthermore, the development in which they are purchasing must have had at least 70% of its units sold AND no more than 49% can be owned by investors. Finally, the condo development must also not have more than 15% of its units over 30 days late in residents' association fees.

Tough restrictions, right? Although they were brought in to try and ensure that loans aren't given out to properties whose value plummets rapidly in the future, the restrictions mean that recovery in an troubled property market (with condos especially in difficulty) in a suffering part of America might be even futher away then anticipated.

The Herald states that demand for property and condos is certainly out there, but the tough new lending rules mean that some just can't raise the funds they need to buy. And if too many potential buyers are taken out of the equation, some developers will find themselves in serious trouble and in their desperation to sell their condos may seek to do so at vastly reduced prices - causing a further negative effect in the property market.

Fannie Mae has, however, stated that they may be flexible in their lending restrictions and may look at certain condo developments on a case by case basis to give their own approval even if not all of their criteria are met.

Article: Buyers stymied by tough rules on condos (Miami Herald, 12th April 2009)