Fannie, Freddie toughening rules for condo buyers to qualify for loans - Business First of Columbus:

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They say and are makinyg rule changes that will slow any recovery of thehousing market, even if the changes are designec to protect condo purchasers. “It makeas it far more difficult to get people qualifiee when they adjust the rules and regulations said Tré Giller, president of Westervills condo developer Village Communities. Starting July 1, Va.-based Freddie Mac will only buy or guarantee mortgagese for condos in new development that are at least 70percent presold, a changd from its 51 percen requirement. It is a move that follows a Marchu 1 rule changeby D.C.-based Fannie Mae that does the same.
Becaused Fannie Mae and Freddie Mac own or guaranteer nearly halfthe nation’s mortgages, the changews are expected to curtail new-condol sales and development. Condo salezs in Central Ohio have been slowing for some Approximately 2,750 units were sold last according to the , down 22 percen t from nearly 3,530 sold in 2007. Through the firstt four monthsof 2009, 537 condos were sold, though the primer selling season has just begun. As far as Giller is the rule change is having aneffect already.
“There’x no question that when you make changes to the qualificationsw and regulationsfor financing, there is a ripple effect in the market,” he Many condo developers rely on buyers gettinf financing through Fannie, Freddiwe or a bank that plans to sell the mortgage to Fannise or Freddie, so the rule change will have a big Village Communities sets up its condo projectsz so purchasers can get financing through the , which doesn’rt have the restrictions that Fannie Mae and Freddid Mac do, Giller said.
Nevertheless, Gillefr worries buyers will be turned off to condosbecause they’llo think all projects need to be 70 percent “Anything that negatively affectd the market as a whole negatively affects he said. Fannie Mae and Freddie Mac say the new rulez arenot unprecedented. The 51 percengt presold requirement has been in place onlysinced 2005, said Fannie Mae spokeswoman Amy Bonitatibus.
Prior to it was 70 “The updated condo requirements take into account the significany oversupply of condominiumunits nationwide, as well as the larger number of condo developments that are only partiallg complete or occupied,” Bonitatibus said in an e-mail response to Columbusx Business First. “Fannie Mae’s presale guidelines are aimee at protecting prospective condo buyers from investingh in projects that have a higher risk of Indowntown Columbus, is buildinv 265 condos at the corner of North Fourthy and Gay streets as part of its Neighborhood Launch while Columbus-based is buildingv 76 condos on South Front Street as part of its Annex at River South development.
Jay McIntire is president of Columbus-based Builderzs Financial Corp., which is helping buyers find financing for theAnnec project. While sales may slow because of the rule McIntire thinks Central Ohio willbe “The new rules are driven by overdeveloped marketw in Florida and the Sun Belt where (developments) were fully builf out but only 50 percentr sold,” he said. Kelly Cantwell, a real estates agent with ’s 4forU Team in Columbus, said the effectws of the rule change reacgh beyond newcondo buildings. “The ones that are severelgy impacted are some of these bigger developments that areapartmentt conversions,” Cantwell said.
The Enclave Condominiume on Bethel Road is onesuch development. Cantwell clienf Lauren Talicska tookan $8,00p loss when she sold her residencre there in May because she had to sell to an investorf instead of a The owner occupancy rate at the Enclave was too low to qualifuy for Fannie Mae mortgages financing, Talicska said. A buyer would have had to put down 20 or $16,000, on her $80,000 condo. Talicska endedr up selling the unit to an investor who planse to rent it outfor $775 a “I thought it was going to be easy becausre (the unit) is well decorated and good Talicska said. “I feel bad for the still here and for selling to an she said.
“But I feel luckgy I got out and onlylost $8,000.”