The additional layer of checks adds yet another complication for the California condo market, which historically has been much softer than that for single-family homes.
Buying a condo is tricky enough. But a federal database of problematic condo buildings — which some lenders are calling a “blacklist” — is making it even harder to get a mortgage for some.
The database was created by Fannie Mae, a government-sponsored corporation that buys mortgages from lenders and sells them to investors as securities. The system frees up lenders’ funds for additional loans and lessens their risk, generally resulting in lower rates for buyers…
But not for every buyer. More than 700 California condominium complexes are flagged in Fannie Mae’s database as being “unavailable,” meaning the company won’t purchase loans for units there, according to data provided by condo law firm Alcock Marcus. The number of affected condos has skyrocketed in the past few years.
The impact of being on the list could be severe. A bank often won’t lend money for a condo that’s on that list, said Kevin Casey, a Bay Area loan officer with Guarantee Mortgage. That means the buyer has to either get a non-qualified mortgage, which is a riskier type of loan that comes with higher interest rates, or back out of the deal entirely….
Condo owners and sellers were already struggling to find insurance, with providers either leaving the state or significantly raising rates. Those insurance woes have also resulted in the Bay Area having some of the highest HOA fees in the country. And in the Walnut Creek retirement community of Rossmoor, most buyers have to pay in cash after Fannie and Freddie announced they would no longer back mortgages there unless it was funded for a complete loss. Rossmoor is one of 35 flagged condo complexes in Walnut Creek, according to the Mercury News.
Casey, the Guarantee Mortgage agent, said buyers who are considering bidding on a condo should make sure it’s in a well-run association, as that can determine how much time they spend navigating issues later in the deal.
You’re buying two things,” Casey said. “You’re buying what’s between the walls, and you’re buying the management company. So you have to spend … a good amount of time looking at that HOA.”… (more)