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Fannie Mae and the FHA Play a Round of Condo Bongo

by Houston Agent

Two different government lenders are approaching condominium fees and regulations from different perspectives.

Two government mortgage bodies, Fannie Mae and the Federal Housing Administration (FHA), are revisiting their policies regarding condominiums, though their approaches could have contradictory effects on the condo markets.

Firstly, Fannie Mae has announced that it will charge higher fees to review condominium projects for financing. According to a HousingWire piece on the decision, beginning April 1, the GSE will now charge $2,500 for mandatory and voluntary reviews (up from $1,200), plus an additional $30 for each unit in the project. Also, areas such as Florida, where reviews are mandatory, will no longer be exempt from paying fees, and if more than 20 percent of a project’s space is for commercial use, Fannie will charge a new, one-time fee of $5,000.

Fannie has stated that the revised review process will allow it to better measure the risk of financing new condominium units, but Peter Zalewski, the principal for Condo Vultures, told HousingWire that it may be an impediment for consumers.

“The Fannie Mae fees are likely to work toward strengthening the quality of their portfolio but not assisting the qualified buyers who need the financing assistance,” Zalewski said.

Additionally, the new fees come on the heels of more bad news for Fannie’s finances. In 2011’s fourth quarter, the GSE lost $2.4 billion, adding to a total 2011 loss of $16.8 billion. Altogether, Fannie has received $116 billion in bailout funds and paid back roughly $19.8 billion.

On the other side of the federally-funded condo market, though, the FHA may reconsider recent condo regulations that consumes have said negatively impacts purchases and refinances.

As HousingWire describes it, in 2011, the FHA instituted a series of restrictions on the condo loans it would guarantee, such as: for projects built more than a year ago, at least 50 percent of the units needed to be occupied; one investor could not own more than 10 percent of the units; and, the FHA would no longer refinance developments with more than 15 percent of its units in serious delinquency.

The restrictions have faced opposition on Capitol Hill, where Democratic lawmakers have appealed to Department of Housing and Urban Development Secretary Shaun Donovan to review the policies and, most recently, FHA Acting Director Carole Galante was questioned by Robert Dold, a Republican congressman from Illinois, on the merits of the restrictions.

Galante said that though the FHA will review the restrictions, it must also keep its finances in mind, which have been a constant source of concern for analysts and lenders in recent months.

“I will commit to you here that some of these I think we can make some adjustments,” Galante said. “There are others where we have to walk an important line here to assure that FHA loans are stable and operating, because there is a concern about that for th FHA fund.”

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