Wednesday, March 18, 2009

Bye-Bye to Obtaining a Mortgage on a Condo! The condo trap!

Condo market to be murdered by Freddie and Fannie.

Has so much capital ever before been wiped out by the stroke of a pen - and yes this is our government.

I bet you would not guess it is impossible to get a mortgage on a beautiful downtown condo! How is this possible? But Freddie and Fannie have some rule that if 10% of the building is still owned by the developer and the developer has these up for rent, a mortgage lender can not pass the mortgage to the GSE! In this market that means no mortgage. This means the developer cant sell his unsold units, the situation is not correctable. This is what has happened to me – as a result my condo is unsellable.

See WSJ story

Here is a letter I wrote to my congress person in the hope of finding out why we have this rule.

Dear Rep. Sue Myrick,

Inequitable Rules from Freddie and Fannie.

In 2003 I purchased a condo in The Arlington downtown Charlotte as an investment. In early 2008 I became very ill and became paralyzed and was forced to close my business (hopefully only temporally) in Matthews. Today my income is limited to Disability.

In October I asked Allen Tate to sell the condo. They valued the property at 850k. Today I have the property on the market at 650k. I have a mortgage with Bank of America for 440k. I have now begun the steps to hand the property over to them as I can no longer make the monthly payments.

The key appears to the GSE’s treatment of condo developments where the developer has a continuing interest. No lender will give a mortgage on the Arlington. There is some rule that if more than 10% is owned by the developer any mortgage is not insurable by the GSE’s. This ensures no condo is re-sellable.

So the only way I can sell my condo is to a cash buyer. I have spoken to the developer and he would love to sell the remaining properties he owns but he is caught is the same trap.

This makes no sense.

I have tried to contact Freddie, Fannie and numerous lenders. The GSE’s will provide me no information. The lenders confirm that they will not make loans.

If this is true these rules will have a very negative impact on the uptown condo market in Charlotte. I have come to terms with handing my condo over to Bank of America as I need to concentrate on my health. But it is my duty to my fellow citizens to bring this inequitable ruling by a government agency to attention of everyone.


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