January, 2009:

New rules raise the bar for condo mortgages in Florida

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New rules raise the bar for condo mortgages in Florida

Lending giant Fannie Mae is slapping tough new requirements on mortgages for Florida condos, moves that analysts believe will make it even more difficult to sell units in buildings already starved for residents and struggling financially.The standards, which took effect last week and apply only to Florida, include requiring that no more than 15 percent of a building’s unit owners be delinquent on association fees as a condition of funding home loans to new buyers.

Fannie Mae buys the majority of home loans from lenders, so it wields significant power in the making of mortgages. Fannie-backed loans generally offer the best rates and lowest down payments for borrowers.

The company, wracked with financial problems of its own and in conservatorship with the federal government, said it singled out Florida after a review of its mortgage loans revealed record-high default and foreclosure rates among condo owners. It also cited the excessive number of condos listed for sale, which has driven down prices.

The new rules come at a time when condo buyers already face difficulties getting mortgages. Many banks over the past two years have dramatically pulled back on condo lending, requiring down payments of up to 40 percent in new buildings. Some lenders even have blacklisted condo buildings, citing a high risk of price declines and defaults.

Fannie Mae’s timing ”couldn’t be worse,” said Jack McCabe, a South Florida real estate consultant who believes the region is mired in a housing depression. “This is effectively going to make it much more difficult to qualify.”


The new conditions include:

• No more than 15 percent of unit owners can be 30 days or more past due on association fees.

• For new condo buildings and condo conversions, at least 70 percent of units must have been sold or put under contract. That’s up from 49 percent previously.

• Fannie will have to review condo buildings itself to make sure they meet Fannie requirements — at the lender’s expense. Before, Fannie relied on the lenders to perform these reviews.

Charles Foschini, vice chairman of debt and equity finance for brokerage CB Richard Ellis in Miami, said Fannie was protecting investors, borrowers and taxpayers, as it should in a climate of increased risk.

Borrowers will benefit, he said, by knowing they are moving into a condo complex that is adequately funded and has plenty of reserves, allowing them to predict their monthly expenses.

”From the taxpayer’s perspective . . . the quicker we can instill sounder underwriting practices for mortgages for Fannie or anyone else the more confidence we’ll have in the market,” Foschini said.


But many condo buildings won’t meet those requirements, meaning the buildings most in need of bringing in fresh buyers will increasingly have trouble doing so.

Sharon Dodge, president of the condo association at The Venetia, a 30-year-old building next to the Venetian Causeway in Miami, said about 32 percent of unit owners were past due — more than double Fannie’s new rules.

She described the rules as ”driving the nails in the coffin,” just as the association is making headway on collecting delinquent payments and when sales were finally picking up.

”To have the major source of loans draw a line through us is terrible; it’s wrong and it shouldn’t happen,” Dodge said. “The feds can’t pull the rug out from under us.”


McCabe estimates as much as 25 percent of the market in the tri-county area will be shut out of Fannie-funded financing.

Peter Zalewski, whose Condo Vultures realty specializes in bulk sales of distressed condos, said his figures show that as many as 41 new buildings between the Julia Tuttle and Rickenbacker causeways, and from I-95 to Biscayne Bay, may be ineligible for Fannie Mae approval because they don’t meet the new 70 percent ownership threshold.

”It’s devastating,” Zalewski said.

Fannie is not the only source of funding for lenders who want to make condo loans. But John Bancroft, executive editor with trade publication Inside Mortgage Finance, said No. 2 mortgage guarantor Freddie Mac typically follows Fannie Mae’s lead and would likely implement Fannie’s guidelines soon.

The two companies owned or backed nearly $900 billion in new home loans in 2008, more than two-thirds of the market overall. Ginnie Mae is the major guarantor for FHA and VA loans. Few new buildings had been able to meet FHA certification requirements either, Zalewski said.


Because few lenders are holding loans in their own portfolios, the Fannie vacuum could create new opportunities for cash-rich buyers who will be able to command even greater discounts, predicted Grant Stern, principal broker of Miami-based Morningside Mortgage.

”Fannie Mae declared Christmas for hedge funds who want to buy bulk in these buildings, but it’s leaving everyday investors and people who want to buy for their own personal use in the dust,” Stern said.

Stern added the restrictions further exemplified the self-fulfilling, cyclical nature of the credit crisis because Fannie’s action would bring about further price declines, more foreclosures and potentially more losses for the company.

”It starts with fear, then a reaction. Then the reaction causes that fear to occur, which then confirms the fear and causes a further negative reaction,” Stern said.

© 2009 Miami Herald Media Company. All Rights Reserved.

I have been thinking of getting my real estate license. Is now a good time?

Now is a good time to learn, but not a good time to earn. For the entire year 2008, an average of less than 2 sales occurred per each local Realtor agent, as was reported through our local MLS.  
So, as an average agent, you might reasonably expect average results. As to what that would equate to in actual income, those average performance results would provide you with annual earnings of something well below the 2008 poverty line. You know that old saying, “Don’t give up your day job!”

Second homes: The sweet life on a stretch of Florida’s ‘sugar sand’


By Larry Olmsted, Special for USA TODAY

Unlike densely populated South Florida or theme-park epicenter Orlando, the western panhandle of Florida has no big cities, and trendy nightclubs are few and far between. The region is not exactly sleepy, with plenty of golf courses and resort developments, but for many years it hasn’t drawn much attention from second-home buyers beyond nearby Louisiana, Texas and Alabama.

Not so any longer. Attracted by some of the best values in Florida (not to mention some of the state’s most acclaimed beaches), buyers from all over the USA and Canada are heading to south Walton County. A new international airport scheduled for 2010 may bring them from even farther.

The main selling point is sand, so soft and white locals call it “sugar sand.” The 26-mile stretch of coastline that constitutes the beaches of south Walton County has 14 towns or communities  including Seaside, the locale for the fictional picture-perfect town in the film The Truman Show. All 26 miles have been certified “Blue Wave Beaches,” an environmental seal of approval from the Clean Beaches Council.

The entire strip is on a narrow peninsula between the Gulf of Mexico and Choctawhatchee Bay. More than 40% of the region is owned by the state and protected from development. There are numerous state parks and preserves, as well as an extensive network of protected sand dunes. All of it is linked by more than 200 miles of bicycle paths and hiking trails. But the landscape is not all nature: The strip has about a dozen golf courses.

The 14 communities are each distinct  some gated, some not; some planned, some evolved. The best known are Sandestin, Seaside, WaterSound and WaterColor. Among them, they contain an array of restaurants, art galleries, shops and recreational facilities. Most have a mix of houses, townhouses and condos. Prices also are diverse, from just over $100,000 to several million dollars.

“Compared to south or central Florida, we have a huge variety of product with a large number of affordable homes,” says Joe Bracciale, director of real estate sales at Sandestin.

A look at three south Walton County neighborhoods

 WaterColor. This 500-acre mixed resort and residential development designed in traditional Southern style, includes a boutique hotel, spa, beach club, marina, shops and restaurants. Residents also have access to a nearby Tom Fazio golf course. Home sites range from $96,000 to $1.5 million and houses from $575,000 to $4.6 million. The master plan calls for 1,140 homes.

 Sandestin. This huge development contains 30 subcommunities on 2,400 acres with thousands of homes and condos, some in high-rises. It also has four golf courses, a tennis club, spa, marina, 7 miles of beach and coastline, a shopping center, pedestrian retail village, 20 restaurants and several hotels. Condos begin as low as $129,000, and houses run as high as $3 million to $4 million, but “the majority of our residences are in the $250,000-$600,000 range,” says Joe Bracciale, director of real estate sales.

 Town of WaterSound. A sister property to WaterColor, this development includes three neighborhoods, all designed in an architectural style inspired by Nantucket. WaterSound Beach is a gated, 256-acre beachfront community with mostly private homes. It has lots from $275,000 and houses from $865,000. WaterSound West Beach is a 62-acre coastal community surrounded by protected land with fewer than 200 home sites. Lots begin at $159,000 and houses at $699,000. WaterSound, on 1,400 acres, has the most residences planned, more than 1,200, and the most amenities, including a golf course and extensive trails. Lots start at $59,000 and houses from $459,000