Fannie Mae New Restrictions on Condo Mortgages

Does anyone know what the percent of rentals in a development would need to be at before mortgage companies would deny a mortgage?

I tried looking it up on the internet but cannot find the percentage.

thanks

Here's another article

http://www.startribune.com/business/41587502.html?elr=KArksCiU1OiPiiUiD3aPc:_Yyc:aUU

Seems that paid up assessments and a reserve fund are the most important thing lenders will be looking at.

Unless you are a HUD housing, why would rentals be looked at?

Maureen,
Don't confuse HUD with Fannie Mae. Call Fannie Mae and ask this question........why not?

You may get someone to tell you one thing and one another, and as long as I have looked I have found no definitive answer. The last I tried I was quoted by Fannie Mae as somewhere around 30%. But I believe I understand a lot of this sub prime mess was (In part) because Fannie Mae got to heavy involved in buying bundled mortgages, In other word the Mortgages had already he given by someone else. I am sure Fannie Mae may involve themselves in some projects at the mortgage level, I just never heard of them denying a mortgage because of owner occupancy in a association. Everywhere you look in the past couple years of Mortgage processes there is windows of opportunities to do whatever it takes to get the mortgage approved and bundled. Florida courts are now being tested by a lawyer that is demanding that the foreclosers produce the original note. Many of these notes are buried somewhere in this bundling process and can't be found or will take years to find. Don't know how this will work out.
Also, how many condo, especially, since rentals is the subject have enforced requirements for their rental units. Hell, lots of condos don't even keep tract of who rents, Ask you management to give you some hard figures. Ask to see sign lease agreements, especially in resort areas, where the rental time can be a couple of days. Also, even if your CC&R's address rental, how many have an enforceable chapter in their docs and how many have outdated and ignored docs.

Ask your management to review all the active membership documents to see if they(the management)actually receives, keeps records, has a standard form that they require all potential mortgagees to file out and sign. When you do, please post back and let us know. I personally think it is a long neglected, non enforced, nobody cares what may be a legal requirement. I would include all these condo rider and second home requirements for time in residence, to be nothing but a sham. I personally see this residence requirement violated from the the first day that the mortgage is approved.

MaureenM,
I don't know why this slipped by my last, but I neglected to mention FHA. I know very little about the technicals and the finances surrounding this Mortgage business, but right or wrong, I get the impression FHA Loans are a cut above the rest. I don't recall hearing any implications of them being down in the sub-prime dirt.
I have a little reason to believe that FHA will inquire into condo mortgages and will make a decision on approval based on Owner Occupancy, or if you prefer % rentals. If I recall that figure was something like 30% rentals.
Maybe it is because FHA is a smaller player in mortgages (if true) and able to keep up with the demands for FHA mortgages.
What does all this mean (if true), I haven't got a clue.

I just think the wellbeing of condo's where rentals are concerned should be tightly control by the individual associations, with strict requirements from the state or maybe Federal level. It is one thing to allow associations as much independence as possible, and I support that, it is another thing to let the majority of homeowners in an association run it into the ground in search of a profitable investment.
Fulltime residents of any association are not as fluid as those that buy to rent property. It things don't work out for the investor, he sells out and moves on, many full timers don't have this option, for a whole bunch of reasons.

Maureen,

If the developer has been approved as a Sectin 8 housing provider then he can rent the homes he owns to Section 8 voucher holders. He can't do this unless he has been approved by HUD.

Maureen,
Please see ((((( comments to your reply))))))
Posted By: MaureenM1

Robert,

I own in a small community of 40 homes, only 28 have been built to date (development started in 2005). Builder and developer dragged their feet and incompetent sales people didn't help sell these homes when the market was good in 2005-2006. We are listed as condos, however, our homes are townhomes, 2500 sq. ft. 2 floors, plus basement. No amenities, just 40 homes on 11 acres. We are gates, however, the gates have never been operational since we lived here, which is a constant battle with builder/developer/township. (((((Because you are townhouses, does not mean you can't be a Condo. It is vital you find out what you are. You must have individual unit descriptions listed in the Court house. Suggest you just ask the developer for your charter or license, or registration or what ever and where ever this business is listed by the state.)))))))

Now we have 28 built with the builder owning and renting 9.(30%) There are new rules with Fannie Mae and other mortgage companies that came out the beginning of March with restrictions on rentals and how many units are owned by a single entity (in my development's case our builder)monitoring unpaid assessments, etc. ((((((((((very interesting, do you have a reference source and is it state or federal mandated/))))))))))))))))

Myself and my neighbor were elected to the executive board, however, the builder is the President/declarant with two appointed family members on the board, so we are ALWAYS outvoted. (((((((((((((I'm confused, who elected you all. If your members did and the developer approved, this may be legal recognition of your association. Just a guess))))))))))We keep track of every rental and we make certain the management company forwards us the leases. ((((((((((((So you have a level of management between you and the developer. Who signs the management contract? Can you as a Board member direct the management Co.? Is it in writing?)))))))))))))))))))))))

We are trying to see how (if even possible) to stop him from turning our development into a rental development since 19 owners have downsized from other homes and bought here to live here permanently. As you know, with renters come problems. We have suspicions that our builder is renting to Section 8 renters and he is also implementing a Rent to Own program (which a story ran in our local newspaper about his plan where his property manager was quoted). With the new mortgage requirements (we are 30% owned by a single entity) just don't know how potential buyers be approved for mortgages. One owner emailed asking how many owners vs renters when he refinanced a few months ago. Said the mortgage company required this information. (((((What information did he get and why was he asking, he is not the one providing the Mortgage, he is just the holder of the mortgage)))))))))))))))))))))Also, don't see how we will ever get out of declarant control at this rate if the builder continues to build and rent. I didn't buy into a dictatorship!!!, however, I feel like I live in one. ((((((((((((((You got that one dead center, but, buyer beware.)))))))))))))))))))

I am in the process of seeking legal advice on this but am trying to to do some research beforehand. ((((((((((((((excellent idea))))))))))))))))

(((((((((((((Maureen, I don't expect you to answer all these specific questions. All I am trying to do is start a mind process that stands a better chance of living better. If you have 19 folks that live there full time, they can be a formidable force, if together and organized. I know there is a great tendency to try and solve all these ailments anyway possible. But the real goal is long term, think several years down the line and prepare, meanwhile fight and scratch to
improve your properties on a daily bases. Get a lawyer, but do not lock in with him/her. Pay them to find out what you want to know, pay them at some point to send a letter to the developer with your concerns and suggestions for resolutions.))))))))))))))))

Yes, the 19 owners are organized. We meet every four months on our own to discuss the present concerns of the development and the
future of the development. They are very organized meetings, minutes, agenda and we get a very big turnout. I have everyone's email addresses and phone numbers and we are in a continuing dialogue.

The owners are the ones who elected myself and my neighbor on the executive board. However, we don't have our exact titles, just that we are on the board. Our bylaws read that once 25% were built an election would take place and two homeowners would be elected on the board. The builder and his brother also ran for these two seats since his father's company is the delcarant of which he is the President and his brother and he owns 9 units (and rents 9 units). So technically they are homeowners. I guess since they are also owners they felt they could run against myself and my neighbor. Regardless, the owner's voted unanimiously for us and no one voted for either them. We rallied the owners before the election and made sure whoever could not attend the meeting signed a proxy. We have only been on the board since July 2007.

There was a discrepency between the CCR's and the bylaws. One stated three members on the board and the other stated 5. The builder and his brothers ammended the bylaws before the meeting to correct the discrepency which it states in the CCRs they can do it so there are three of them on the board and two resident owners (me and my neighbor).

Since we are the minority it usually works if the builder doesn't care about a particular issue one way or the other he votes with us if he does care about an issue (usually when it affects his renters) he votes against us and we are out voted. In some issues he has voted with us and then changes his mind at votes against us or vetos the vote.

He hired the management company, however, we constantly email them and site the bylaws to get the information from them that we need, ie, leases, contracts, etc. My neighbor is a financial analyst so he looks at all the finances and gives his feedback to the Association. It's a constant battle with the builder/developer and management company.

We are always looking towards the future, however, unless things turn around our developer will be in control for some time, however, that doesn't mean to me that he can do whatever he wants, especially if it's not in the best interest of the development and the owner's who invested in his development. That is why I am seeking legal advice. I am not going to commit, just want some advice and a letter or two sent to the builder so he knows we are looking out for our future and the future of the development.

I could go on and on.....

thanks for your advice

Maureen,

Since you are a board member, why not have a nice, friendly, little chat with the developer about all the concerns you have? Also ask him if he has been approved to rent to Section 8 individuals.

I and my fellow board member requested several times to meet with him in writing and he has refused to meet with us. He feels he is the President, he and his relatives that are also board members have in the majority and he does not have to explain anything to anyone.

We will need to seek legal advice at this point in order to preserve our development.

the development I live in is still a new development. We still have 14 homes to be constructed. only 28 are build out of 40

Maureen,

Well, if he doesn't want to meet with you there's not much you can do about that. But, since you biggest concern seems to be whether or not he's going to rent to Section 8 individuals, I would suggest asking him that at the next board meeting. He'll either ignore the question or let you know whether or not it's true. Nothing ventured, nothing gained.

Regarding you and your fellow h/o's hiring an attorney. May I ask for what purpose? Do you have actual proof that the declarant has broken any laws? If not, then there is no legal action that can be taken against him, right? Why not just bide your time until turnover occurs? As a board member you will be privy to all actions of the board. Make notes of everything that is questionable to you and spend some time trying to determine whether those "questionable" things equate to wrong doing or not. Oftentimes, people will complain about a board's actions only to find they were NOT doing anything wrong. Spend time reading the gov docs and any applicable HOA state law. If the majority of the board votes to do something outside the gov docs or state law you can set them straight by quoting the applicable article or statute.

I agree.