Bwarney Fwank Meddles in a Fannie Again

[392cobra]

Well,I guess the Libs figure it's time for Round 2.


Fannie, Freddie asked to relax condo loan rules
Mon Jun 22, 2009 10:48am EDT

(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.

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.

In an interview with the paper, Weiner said the rules have "had a real chill on the ability to get these condos sold," at a time when prices of condos have fallen enough to attract potential buyers.In addition to the 70 percent sales threshold, Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble, the paper added.

Both Fannie and Freddie are preparing a response to the lawmakers, according to the paper.

Fannie Mae and Freddie Mac could not be immediately reached for comment by Reuters.

[cobra de capell]

I hope Fannie and Freddie don't give in to these morons.

[Ron61]

Based on past examples if they do, then in another three or four years we should be able to go through a smaller version of what we are going through now as they have to repossess them and bail out the lenders again.

Ron

[bomelia]

Fred, your thread title is awsome.

Mike

[1ntCobra]

So if a developer starts a brand new condo development and 0% of the units are sold, how do they get from 0% to 70%? Is the developer stuck only with buyers that can pay 100% of the purchase price with cash? Exactly how many of them are around?

[cobra de capell]

There a loans available other than directly from Fannie/Freddie and those loans can be arranged through a mortgage broker or large financial institution.

Fannie/Freddie are just being conservative.

[4RE KLR]

Originally Posted by 1ntCobra

So if a developer starts a brand new condo development and 0% of the units are sold, how do they get from 0% to 70%? Is the developer stuck only with buyers that can pay 100% of the purchase price with cash? Exactly how many of them are around?

Looks like we are going back to the good old days of straight conventional lending.

If we had stayed there to beging with the country would be a lot better off.

[bomelia]

Originally Posted by 1ntCobra

So if a developer starts a brand new condo development and 0% of the units are sold, how do they get from 0% to 70%? Is the developer stuck only with buyers that can pay 100% of the purchase price with cash? Exactly how many of them are around?

You miss the point. By having any threshold at all means other conventional banks are involved. Other risk takers... not just the government. It makes complete sense. What Barney is asking FM to do (again) is to lower the bar. Do you get it? This not about FM ponying up a percentage of the money for each condo. Its about FM deciding to step in at some point when enough OTHER risk takers have ponied up THEIR money. 70% of the owners are reliable borrowers. The other 30% are more risky. FM backs those folks up. When FM backs up most or all of those risky borrowers, then the financial reliability of the entire investment (the condo building) is at extreme risk. Requiring 70% to be convential means the viability of the building is much greater. Doing what Barney is asking is EXACTLY how we got into this mess in the first place. Letting whole areas be purchased by people who are high risk borrowers is assinine. And it is downright immoral.

Mike