The decision came as a surprise, since the building had been approved in years past, Ms. It wouldn't discuss its rejection with the association's representatives, Ms. Through a consultant hired by the condo association, Fannie informed the building just before Christmas that it no longer qualified for financing from the company. Terrie Suit, president of Sanctuary at False Cape Condominium Association, said the building with 248 residential units in Virginia Beach, Va., was disqualified from Fannie financing last month after the revamped rules went into effect. GET FOX BUSINESS ON THE GO BY CLICKING HERE Like Fannie, Freddie has also long maintained rules against financing "condotels," but Fannie has historically been a bigger player in the condo market, according to Realtors and bankers.įannie says its revamped rules are meant to clarify longstanding policies, which revolve around the eligibility of the entire condo project, not particular units. It was unclear how many condos are located in beach towns and other resort areas affected by the tightened rules. Condos make up between 7% and 10% of their business, according to the Federal Housing Finance Agency, the firms' federal regulator. Together, the companies backstop about half of the $11 trillion U.S. The companies' promise to make investors whole in case of default keeps down the price of home loans and underpins the popular 30-year fixed-rate mortgage. Instead, they buy mortgages and package them into securities that are sold to investors. RICH NEW YORKERS’ SECOND HOMES TARGETED IN PROPOSED ‘OLIGARCH’ TAXįannie and Freddie don't make loans. The focus is also more on "condotel" buildings organized centrally through management, rental and realty companies than on individuals who offer their units on Airbnb Inc. "Until there is more clarity from the agencies, all mortgage bankers are shutting off the valve on condo loans right now," said Rob Henger, director of mortgage banking at FirstBank Mortgage, a Nashville, Tenn.-based bank. Bankers fear Fannie and Freddie may no longer buy loans on certain condos or force lenders to buy back mortgages on ineligible buildings.
"We provided clarity to lenders regarding what are acceptable residential condominium projects and what meets Fannie Mae residential lending standards and practices."īankers say the tighter requirements are beginning to limit the number of lenders for second-home condos, driving up interest rates on new loans and limiting the availability of 30-year mortgages on such units. "Fannie Mae's charter is for residential lending," the company spokesman said. When a project as a whole functions more like a vacation rental resort, the building is ineligible for Fannie financing, and mortgages secured by units in that project are also ineligible, the company says.
Getting a mortgage for a resort-area condo might become more difficult after Fannie Mae and Freddie Mac moved to tighten rules on buildings with many short-term rentals and hotel-like amenities, some Realtors and bankers say.ĬHIP AND JOANNA GAINES-RENOVATED HOUSE ON THE MARKET FOR $550G "We have specifically told lenders that seeing individual units advertised by their owners on home-sharing platforms does not, by itself, mean the project is a condotel," a Fannie spokesman said. "We're 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 home-buyers across the country," said Ken Fears, a senior policy adviser at the National Association of Realtors.įannie says its revamped rules are meant to clarify longstanding policies, which revolve around the eligibility of the entire condo project, not particular units. They also fault the process Fannie uses to determine the eligibility of a building, saying it is opaque and can't be disputed by a building's owners or its homeowners association. IS MY HOUSE A TEARDOWN? HERE’S WHY IT MAY BE AN EASY YES OR NO ANSWER Fannie Mae last month changed its rules to make it clearer that it won't back certain loans in high-rent vacation areas, with Freddie Mac taking similar steps that go into effect next month.
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