Is Getting a Mortgage Over?

The vicous cycle continues...

but...assuming this guy has a financing contingency in his contract, he's off the hook to buy and can stay indefinitely as a renter in the very same apartment. not great news for the sponsor but i don't see how he loses.

Already posted in full:

http://www.streeteasy.com/nyc/talk/discussion/8889-few-borrowing-options-for-some-condo-buyers

but...tell me again how this person loses if they have a financing contingency.

Most new development condos did not allow a financing contingency in their contracts.

this isn't new development...this is a conversion.

columbiacounty: Is he a tenant in residence? I didn't see that. Looked to me like he was an outsider with no special rights.

You lose because no one can get financing if under 70% sold. So no non-eviction plan will work anymore. New development won't be able to release inventory slowly as they do here. In Florida by law new development had to be 50% in contract before the construction loan would even be released, yet it still crashed. That will happen here, and we'll see what the REAL inventory figures are.

oh, hold the funeral music for a minute. Fannie Mae guidelines changed Mar. 1 so that they're only looking for buildings 70% sold/in contract, but there are lots of loans outside the Fannie Mae system, including every jumbo.

Credit is really tight, and condo loans are tough to get, but they're not impossible.

ali r.
{downtown broker}

Every nonconforming jumbo, which currently have a huge premium over conforming loans.

70% sold is the new standard, to eliminate speculation.

Ring, ring, ring. That's not the phone - it's the death knell of Manhattan real estate.

True, but I have to wonder why anyone would want to buy in a building that's less than 70% sold right now. This may make that decision to walk away no decision at all.

PMG thanks for posting this (first i might add). very interesting.

Ali, my understanding is that jumbo loans generally have been issued on terms that are more stringent than conforming loans. I suspect a portfolio lender might continue to offer jumbo loans of say $1 million, to a customer who has liquid assets of $5 million, where the LTV is less than 60%. But why should a portfolio lender take on more underwriting risk than a government sponsored--strike that--government guaranteed entity?

By highlighting this quote from a mortgage broker, I'm trying to shed light on a topic that buyers may not be aware of. In manhattan, there still may be a lot of cash buyers or buyers who take out mortgages for convenience, but don't really need the money. Even if that is true, how long will prices hold if people who need money can't get a mortgage in lots of buildings?

70% sold isn't the only barrier to getting a condo loan now, there's also a new rule (if it's not new it's only recently really been enforced) that says that no bank will lend in a building not on their approved list (and most lists over a year old aren't even valid anymore anyway) that they are already more than 10% invested in. So if a bank already handed out 11 loans in a building of 115 units, applicant number 12 is getting denied no matter how credit worthy or solid the building. This rule killed two of my applications with Wells Fargo so I can tell you from experience it's craziness. Also with banks merging and closing left and right, if there are fewer options and a 10% rule, um, what?

That's news to me, kimerama, and it's very disturbing for condo owners like me. Maybe I need to go hunting for a cash buyer now. Wouldn't this new tightness of credit effect co-op buyers too?

From the 7 managers at Wells me and my team spoke to it's really just a condo thing. Apparently they are trying to reduce their condo business in general as they see that as their riskiest area. And yeah it is disturbing because Wells was like the biggest condo lender in the area and the only one that would even touch new construction in particular so, yeah...

Unless you can pay for a condo in gold it's not really a totally awesome buyer's market right now.

Assuming jumbo lenders hold to the 10% rule and the 70% rule, then developers are dependent on their buyers under contract to find at least 7 lenders willing to lend to their maximum underwriting standard in order to secure financing. If that is true, new buildings that haven't closed substantial sales have little chance of getting financed. Perhaps, in some cases, the construction lender will underwrite buyers, I dunno.

Oh for new construction you just have to go with the building's preferred lender at this point, period. If you don't like that lender's terms or can't get approved by that person you shouldn't sign the contract.

(I should say I'm not familiar with jumbo rules though, that wasn't my situation.)

70% looks to be the new pre-sale requirement for new construction condos. Yes, this is a Fannie and Freddie guideline but most banks and certainly most of the secondary market (when it comes back) will follow Fannie/Freddie guidelines. Therefore, even jumbo loans are affected. Banks dont want to hold jumbo mortgages that they will never be able to get rid of when the secondary market comes back. Some small banks will provide financing on certain buildings regardless of the pre-sale but probably only a handful.

There are 2 approvals required now. 1. borrower and 2. the building. 51% pre-sale requirements still exist for certain buildings with less than 200 units and decent sales velocity. Fannie has a automated approval system for condos with over 51% owner occupied "in contracts." Fannie also have a waiver review process called PERS (Project Eligibility Review Service). They will review condo documents and determine if the building warrants a waiver of the 70% pre-sale. This waiver also applies for building with more than 10% own by the single entity, more than 20% commercial space, and other issues outside of warrantability guidelines. Fannie now charges a fee for the waiver review process and developers are starting to warm up to the idea since it will determine whether most of the sold units close or not.

You will also start to see banks come up with "balance sheet" type programs for condos that dont meet Fannie guidelines. We can lend in buildings with 33% pre-sale but with restrictions today. More news to come on any significant changes.

sunny_hong@countrywide.com

Sunny, thanks for the post.

Sunny, thank you for the useful information. Question though, will this change once Bank of America takes your company over? A friend of mine purchased in a condo building which was 51% sold but Bank of America wouldn't do the loan. Thanks.

Which building was it that was 51% and BofA didnt lend? 51% pre-sale doesnt always qualify a building. It must also meet Fannie's other warrantability guidelines. It is very important to work with someone that knows how to finance in new construction condos. Like I said, it requires 2 approvals, borrower and building. You can talk to 2 loan officers at the same bank and get different results with any bank out there. Sometimes a lender do a loan in a certain building because youre not talking to the right person there and not because they arent lending there. If that made sense.

Shong, are you seeing any limited reviews done on new construction?

So getting a loan at HSBC is a thing of the past now as well?

what is considered Jumbo now? The loan amount is?

And for a lender - why condos are riskier than coops??

just read....under 417...but there is a new conforming jumbo....so between 417-7ish there is a better rate then...jumbo.... so now they have made that middle jumbo loan...which helps that middle group...

"noneviction condominium", what's that?

mbroker - no more limited reviews on new construction condos
Jumbo for 2009 is anything above 625,500. But it will be back to 729,750 with the bill being passed. FHA is back to 729,750 as of today for us. We should be hearing news about 729,750 for conventional loans soon I assume.

shong-you know anything about what the HSBC news means to the industry?

Well, thats just a sign of the times. They havent been big on lending lately especially in condos and coops anyway. All banks are consolidating and closing branches so I think its anything unusual.