Fannie, Freddie Guidelines Slow Down Sales In Florida
18 Februar 2009 - 3:50PM
Dow Jones News
The folks at Friedman, Billings, Ramsey & Co. Inc. just got
back from a tour of south Florida's housing market - visiting Port
St. Lucie, West Palm Beach, North Miami and Miami Beach. The news
was bleak - the region is still stocked with foreclosures and
prices are falling still.
However, those with the cash to buy are finding some huge
discounts.
The "market continues to go through severe house price
adjustments as foreclosures and short sale transactions continue
unabated," analyst Paul J. Miller Jr. writes.
According to FBR, one reason inventory isn't clearing out is
Fannie Mae (FNM) and Freddie Mac (FRE)'s new underwriting
guidelines, which restrict credit to condo projects with a 15%
delinquency rate. That means if a building has more than 15% of
housing units delinquent on the Home Ownership Association or condo
fees - not unheard of as unemployment mounts and burned investors
continue to flee - Fannie or Freddie will not supply financing to
buyers, according to Miller.
One condo unit in a West Palm Beach conversion project sold for
$37,000 cash, from $247,000 back in February of 2007. More than
one-third of the building's association fees were delinquent.
And here's more fuel for cash deals. Last month, Fannie Mae
issued new condo lending guidelines, saying at least 70% of units
in new condos must be presold and no more than 10% of units can be
owned by a single entity, at least 10% of the operating budget is
for reserves, Miller pointed out. The requirements, which he said
were customized to the battered Sunshine State, were crafted to
protect new buyers from buildings crippled by defaults and unpaid
maintenance fees.
These new requirements make it more difficult to get loan
approvals for condo buyers, in some cases placing complete condo
buildings into death spirals once a condo project is disqualified
from Fannie Mae and Freddie Mac loans," he said.
That's tough now, but, in the longer-term, it should help
stabilize the condo environment as it decreases the risk of buyers
defaulting on loans, Miller said.
-Dawn Wotapka; Dow Jones Newswires; 201-938-5248;
dawn.wotapka@dowjones.com