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Frank Wants Condo Loan Rules

Wednesday, June 24, 2009 posted by Tommi Crow

In what could be a “Here we go, again” scenario, Barney Frank (D) and Anthony Weiner (D) have ask Fannie Mae and Freddie Mac to back off on  tightening loan standards for condominum’s.

In March, Fannie and Freddie announced that they would no longer underwrite mortgages on condo’s located in buildings where less than 70 percent of the units were Sold.   Their previous policy required that 51 percent of the units be Sold, before loans were guaranteed.

In addition, the mortgage giants announced that they will not purchase mortgages in buildings that have more than a 15 percent deliquency on association dues, or those in which one owner owns more than 10 percent of the units in the complex.  

In a letter to both companies, Frank and Weiner warned that …70 percent occupancy…”may be too onerous” and the rules could have a “real chill on the ability to get these condos sold”.  The two law makers asked the two companies to “make appropriate adjustments” to their underwriting standards for condos.

Is the tail wagging the dog, yet again???  On one hand, Fannie and Freddie have done their research on past loan failures and determined that their new underwriting criteria is essential in avoiding future financial trouble.   On the other hand, Frank and Weiner fear the restrictions may stop condo sales in new developments where they are desperately needed.

Fannie and Freddie could not be reached for comment, but according to the Wall Street Journal, both are preparing a response to the lawmakers.

What do you think about relaxing the new loan standards for condo’s??  Thousands of our readers would love to know.

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