Fannie Makes Life Harder for Condos

Tom Lindmark profile picture
Tom Lindmark

Possibly driving a stake through the heart of an already moribund condo industry, Fannie Mae (FNM) today severely tightened its lending criteria.

From the WSJ:

The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won’t back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single entity.

Rest assured that very few new condo developments are going to be able to meet these hurdles in the near future. Don’t, however, jump to the conclusion that Fannie is being overly conservative at a time when aggressive lending is needed (I’ll bet we hear something like that from Barney and his cohorts over the next few days). These criteria are very close to the standards that they used to adhere to before everyone lost their collective minds. They represent responsible underwriting to my mind.

One result of this tightening might well be to spur the redevelopment of private lending. A lot of banks have a lot of money riding on the successful sales of these condo units. It may well be that it is in their best interest to make mortgage loans to the purchasers and hold them on their balance sheets. It’s a lot better alternative to having an empty building with no debt service capacity.Eventually, the loans could be sold to private investors or once the project is seasoned and within Fannie’s guidelines the owners could refinance to a conventional mortgage.

So, hope that the builders don’t log roll Congress and force Fannie to back off from a sensible position. We have to take some lumps along the way to recovery and the condo market is going

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Tom Lindmark profile picture
About a year ago, a company asked me to write a daily blog for them. I told them that I’d never read a blog and had absolutely no idea how to write one but sure, if you want to pay me for it, I’ll give it a shot. It was either my good or bad fortune to start at the beginning of the credit crisis. Good because there was a lot to write about, bad because they didn’t really want me to chronicle and opine on the disaster of the day. Guess who won that standoff. But I was hooked on blogging, so I started my own blog, called it But Then What and here we are. I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time. Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so. Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy. Visit my blog or follow me on twitter at

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