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Understanding Fannie/Freddie loan rules and small condo building occupancy

Posted on Mon, Mar 01, 2010 @ 06:19 AM
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I live in a four unit condo building. I have lived here for 14 years and 2 years ago purchased a larger second unit which is now my residence. My initial condo unit is now rented as is one of the other units in the condo association building.

The fourth unit in the building has recently gone under contract and it has come to light that with the changed freddie mac / fannie mae laws, the loan for the potential buyer is challenged on two fronts.

The first is that 1 entity owns 50% of the building and the second is that 50% of the building is now rented. If I understand correctly lenders will no longer lend given this scenario. It has been suggested to me that I file a Quitclaim deed on one of my units which I fear may have negative implications for me and it has also been suggested that there may be a way around this in the small world of non-conforming loans.

I have consulted lawyers, mortgage brokers, real estate professionals and my accountant and I don't yet have a firm answer. Is there a known way around this? Is there any kind of exception for buildings with less than 20 units as these loan laws/rules are clearly problematic? Thank you.


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Comments

If the loan is to an owner occupant or second home purchaser, there are no owner occupancy requirements for Fannie Mae BUT a single entity owning more than 10% of the units will make the condominium inelgiible for a loan from Fannie Mae or Freddie Mac or FHA. Perhaps a local lender who does not sell to Fannie, Freddie or FHA will make the loan 
 
 
 
Stephen Marcus 
 
Marcus Errico Emmer & Brooks 
 
Braintree, Massachusetts
Posted @ Monday, March 01, 2010 7:25 AM by Stephen Marcus
Many years ago our board decided the paperwork for qualifying for FHA and other loans was too complicated, plus we did not have the money in association savings that was required at the time. Turnover rate for our 32 units has been very low, but they have always sold, although the most recent one was on the market for nine months.
Posted @ Monday, March 01, 2010 9:14 AM by nellie
I would not quit claim anything! Here in IL that means you lose any and all right to the property...FHA is making it extreamly hard to get a loan on condos right now... They are high RISK!!!!I purchased mine two years ago and even then it was a three ring circus and the association had ZERO in reserves. I was still able to purchase it but regretted it after the fact living here in this community with its problems has been a NIGHTMARE!
Posted @ Monday, March 01, 2010 9:30 AM by amanda
Association Times is a website that publishes a newsletter online every month, and it also has a question and answer section. An article in the March 2010 issue addresses FHA rules which may help you. 
 
http://www.associationtimes.com/index.htm
Posted @ Monday, March 01, 2010 9:30 AM by nellie
A lot of this is in flux right now. Don't give up your rights so someone else can sell. The intention is really for larger associations, so their lender should be seeking a waiver.  
 
It is typical government overreaction. No one will really have good news for you on this front, I am afraid. Someone shouldbe pushing the lender to see if they can get a waiver.
Posted @ Monday, March 01, 2010 3:59 PM by Joe Schuirmann
I have the same situation. Trying to sell my condo and can not. Its a four unit, and the developer owns three of the units. He rents out one (against condon rule) had one for sale and took it off the market, use they other unit for a summer home. Have you found anyone to help you get by this so called rule that protects me. The condo is a new condo.
Posted @ Tuesday, April 20, 2010 12:40 PM by scott
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