![]() Lenders look unfavorably upon high non-resident ownership.Īrrears restrictions. Under the theory that higher sponsor ownership than resident ownership can destabilize the building, the sponsor can own no more than 10 percent of the units. "I recently spoke to a board at a building that had nine refinances or sales in the past year, and seven went through fine and two had problems." The problem is not in every building or even in every case, the CPA notes. Why does it matter if the building has 10 percent set aside for reserves when it comes to an individual's home loan? Montanye says the rationale is that if there is no reserve and there is a big capital expense, the building would have to raise maintenance - affecting unit-owners' personal finances and potentially jeopardizing the loan. "Now they're making it a line item in order to make it conform to the Fannie Mae regulations." Debbas says that some co-ops or condos face problems even though they have as much as 30 percent of annual charges in reserve but no line item. "We have boards that have been setting aside money for years in reserves but didn't have a specific line item to do so," he says. If your building does not have this, it should set it up immediately.ĬPA Richard Montanye, a partner at the firm Marin & Montanye, says lacking that reserve line-item causes the most problems for condo and co-op buyers. One standard, which frequently trips up condo and co-op loan-seekers, requires that a building set aside 10 percent of revenue for a reserve fund. "You can't have 70 percent all-cash buyers, so how do you get there? You have to have lenders who are willing to take a risk." One rule, for instance, stipulates that 70 percent of the units have to be in contract before Fannie Mae will write a mortgage. "What they're trying to do is to make up for their lax lending regulations over the real estate boom by being over-diligent, and they're looking for reasons not to lend," he says, noting that the issues are particularly thorny for new developments. Debbas, a partner at Romer Debbas, says the belt-tightening started about two years ago. "Banks have to listen to the big man here - and it's Fannie or Freddie - and what these guys are saying is, 'You're on your own if you don't meet our specifications,'" says Griebel, who estimates that as many as 90 percent of loans wind up under the auspices of Fannie or Freddie.Īttorney Pierre E. Each lender has to make sure your co-op or condo building meets the specifications in The Selling Guide at the same time that it scrutinizes the buyer's individual finances. And the guidelines themselves have become more rigorous. ![]() ![]() But within the past few years, lenders have started to follow them more closely. Those guidelines, known as " The Selling Guide," have been on the books for decades, says Griebel, senior manager with Czarnowski & Beer. Why? Because two government agencies - the Federal National Mortgage Association (popularly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) - carry most home-mortgage loans, and so other lenders end up adhering to rules set up by the two entities. ![]()
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