Wednesday, June 24, 2009

Second verse, same as the first

Fannie, Freddie asked to relax condo loan rules: report | Reuters: "In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold 'may be too onerous' and could lead condo buyers to shun new developments, according to the paper.

The legislators asked the companies to 'make appropriate adjustments' to their underwriting standards for condos, the paper added."

What this country needs now is more federal office holders tinkering with the economy. Yes sir. Autos, banking, medical insurance, and of course the housing industry. Why, they have done such a fine job so far, especially Barney Frank.


Anonymous said...

Hopefully funding for condominiums will be reduced. As Fred Pilot has noted, they should really be sold as securities and they are quite different from your typical single family home.

Why should the Feds be subsidizing people to invest in securities? The "upsides" for the "owner" and the Feds seems to be missing. The potential loss on the investment is not limited to the initial investment. The carrying costs of assessments, special assessments, property taxes, etc. make condominiums a poor investment as a security.

As to habitability, the amount of control exerted by the condo association over the owner's property redefines the definition of the term "fee simple" and "ownership".

Condos are poor for habitability and poor financial investments. Should the government be subsidizing condominiums? No.

Why does Barney Frank push condominiums? He is a Massachusetts Rep and cities such as Boston are trying to promote condominiums instead of real homes because of the very high density tax base. See:

Fred Pilot said...

Certainly it's time to take a hard, eyes wide open revisionist look at treating condos as if they were single family detached homes which they clearly are not.

The entire concept needs a redo. If they are to be permitted, I believe they should be regulated as investment securities to be sustainable and to better reflect their true nature as group investments. As long as they are seen as individually held real property, the unit owners will naturally be most interested in their property (or more accurately, airspace) and not in the overall well being and long term financial stability of the condo development as a whole. Consequently, condos tend to have a relatively short life cycle and typically enter a period of ever deepening fiscal and management crisis beginning just 8-10 years after they are built as Tyler Berding has pointed out.

Anonymous said...

As a former condo association president, I cannot believe what is happening and has happened over the last 10 years, in condominiums
apparently across the US. In my opinion, we had some problems early on with a troubled attorney/board president and an associate of his. Then some years of problems by one, or two. The real problems finally became overwhelming. Financial fraud, terrorizing, lies, harassment, discrimination, targeting for foreclosure all by the HOA Board and their "legal advisor."