Brand new regulations about the kinds of mortgages government-supported corporations can buy are going into impact. Condominium owners are facing additional challenges. Unpaid fees on condo maintenance are making the burden higher for everyone. Combined, these two factors are making condo possession one of the least attractive opportunities for brand new home buyers.
New mortgage rules for condos
In order to underwrite mortgages or a short term personal loan on a condo, banking institutions can have to consider a new set of rules if they want to sell their mortgage loans to federal entities. The rules dictate that condominium buildings must not have too high a percentage of renters, must not have pending litigation concerning the safety or habitability of the building and must have less than 15 percent of homeowners delinquent on their condominium fees. The FHA is also requiring that apartment buildings that have been turned into condos be inspected, which costs $1,200 per building plus $30 per unit.
More things to consider
Brand new home buyers started to choose condos during the housing boom. Single-family homes had a lot of maintenance involved. Several preferred the idea of all maintenance being covered while paying a monthly fee. According to condominium associations, they expect some fees not to be paid. This is about 2 to 5 percent of them. There are a lot of associations that have a very high delinquency rate. It could be over 40 percent. There was a 15 percent delinquency rate last year on average. Condo associations and homeowners are now making the same hard decisions. Deciding what to pay and what to defer is hard and has to be done.
Many condos left in limbo
The regulation is keeping condominium associations in limbo about how to proceed. Owners aren’t able to re-sell in the buildings right now. This is as the percentage of units needed to sell is not there or the financing is extremely hard to get. Left unable to pay their rising association fees and, at times, their mortgages, condominium owners also have no way to sell their property. The property either has to be rented out or the condominium owner can do strategic default. These appear to be the only two possibilities left.
Information from
MSN
realestate.msn.com/article.aspx?cp-documentid=13107847
Chicago Tribune
articles.chicagotribune.com/2011-02-28/classified/ct-biz-0228-condos-lending–20110228_1_condo-buildings-condo-deals-condo-market