Foreign National Mortgages to FHA lending - 2010 and beyond!

Welcome to ACM's new blog. We will be discussing mortgage industry information as it relates to us specifically in Central Florida. If you have questions, statements, comments, etc as it relates to the mortgage industry, or current state of the financial market, Please feel free to participate and add your thoughts.

We will begin the discussion on Non Warrantable condominium projects in Central Florida and what is to come of the 10s of thousands of units that are available, either held by the developer, investors, or banks.

First, what are non warrantable condos?

Non Warrantable Condos are not eligible to be sold to Fannie Mae or Freddie Mac because they DO NOT fit into one of the following three classes:

CLASS I

1. Developers control of the homeowners association has been turned over to the condo owners
2. Project is not subject to additional phasing or add-ons which have not yet been completed
3. All common elements and amenities must be fully installed, completed and in operation
4. 70% of all units in the entire development must have been sold and or legally obligated to close
5. 70% of all units in the entire development must have been sold to owner occupants

CLASS II

1. Recent or current condominium conversions (from apartments)
2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years
3. Project is not subject to phasing or add-ons which have not yet been completed
4. All common elements and amenities are fully installed, completed and in operation
5. 70% of the units in the entire development must have been sold and/or legally obligated to close
6. 70% of the units in the entire development must have been sold to owner occupants
7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessments

CLASS III

1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year
2. Project is not subject to phasing or add-ons
3. All common amenities are fully installed, completed, and in operation
4. 90% of the units have been sold (owner-occupancy of at least 60%)

Lenders determine eligibility by requiring the management company to complete a questionnaire.

There are countless projects in Central Florida that are non warrantable for one or several of the above listed reasons. Given the current climate in lending, available mortgages are few and far between. Although we can finance units up to 75% loan to value, there are not nearly enough loans to pull all of these units out of the black hole.

So what happens now?

Many developers are trying to hold on until the market stabilizes, some have converted to apartments or rentals, some are liquidating at great discounts, some have had their projects foreclosed by the bank.

Either way, there is great opportunity for a strong borrower (good credit, 25-30% deposit, stable income, etc) to purchase one as a primary or second home, at a steeply discounted price.

Investors have descended upon this market like vultures, purchasing whole developments from banks and ailing developers. As the units are gobbled up, we sit and think that there are so many more still to go... don't wait too long though because the pace that these condos are being purchased (in bulk and one by one) is increasing rapidly, and so of course will the price!