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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (232411)12/9/2009 10:28:07 AM
From: Les HRead Replies (2) of 306849
 
New lending rules for condominium buyers already are forcing some developers to change or scrap plans for new projects for fear too many buyers will be shut out.

On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals.

The tighter lending standards are designed to protect the financial health of the FHA. About 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency's financial cushion has dipped below the federal minimum.

But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures about one in four new loans today because buyers need only have a 3.5 percent down payment.

"It is a huge debacle for us," said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes.

The company has canceled a 300-unit condo project, spending $300,000 to redesign it into homes. Most of the builders' homes and condos this year went to buyers with FHA loans.

Garbett's condo project didn't pencil out with the new FHA rule that allows only half of a condo building's units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011.

Another new rule requires at least 30 percent of units in new buildings be pre-sold before the agency insures any loans. That number will rise to 50 percent in 2011.

rgj.com
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