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Fannie Mae Special Approval Designation – Updated

March 1, 2010 by Lucas Lechuga
The following are six well known condo buildings in Miami that were given the Fannie Mae Special Approval Designation since my last update on January 18, 2010.  The special designation makes it now possible to obtain financing for condos in these buildings using a conventional loan.

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Elvis

oh, first to comment. Should I be a realtor and say prices are going up and buy now, or should I be like Renter Tom and say I am waiting for the bottom. No need to feed the war, it is just cool that more buildings are getting approval for conventional loans…that helps everybody.

Enzo

Just a reminder that Fannie approval doesn’t mean much, if the HOA deadbeat and rental ratios are high.

Not true Enzo. That’s the exact purpose of the special designation. The following is from the Fannie Mae website: Q: What types of eligibility items does Fannie Mae consider waiving for a Special Approval designation? A: The decision to waive one or more of our standard eligibility requirements is based on a project-by-project review and the overall physical, functional and financial condition of the project. Examples of eligibility issues we may consider waiving include, but are not limited to: pending litigation, excessive HOA fee delinquencies, and investor concentration. That’s why some of the most problematic condo developments in Miami have… Read more »

Renter Tom

Lucas – Do you have any info on what was required to be waived for each building? That might be helpful for some people considering buying in these buildings. The special approval designation is helpful for each building to move into a healthier financial picture, but simply dropping the purchase prices would be far superior instead of just allowing people to take on debt which is what a mortgage is. It is still a finance game.

owneratinfinity

Guys, My bank of america processor/agent/underswriter that handled my condo loan told me that if the condo is Fannie Mae approved (along with my 20% down, high credit score, low debt ratio and good aprrsail) then that is all they need concerning the building to approve the loan. Bank of america never asked for any HOA past due or that type of information from the building. This is what he told me sept 2008 and this guy has a very smart, I would suggest if anyone who really wants to buy a Fannie Mae approved condo get a deal worked… Read more »

Drew

Deja vu? Seriously, South Beach Violence has gotten out of control.

Enzo

Lucas,

If the building has more than 15% HOA delinquencies and more than 30% of units are rentals, it will be difficult to get a mortgage. Sure, the broker may even close the eye, but it’s up to the appraiser to check ratios. If the appraiser doesn’t ask the building for delinquency and rental ratios, you can get the loan. That rarely happens, though, because crooked appraiser aren’t that predominantly anymore.

Enzo

Please, by all means, go ahead and try to get a mortgage in a building with those high ratios. I talk to brokers all the time. Don’t believe me, try yourself.

Enzo

You know what, I’m not going to bring reality to the blog anymore, since everyone wants rainbows and unicorns. You prospective buyers go out there and find out for yourselves. I’ll continue to read it but won’t be participating to prepare buyers for reality. Plus, what do I know since I just talk to brokers, developers, and Realtors in a weekly basis. It’ll be better for this blog’s groupthink

Joe

Drew — That story lacks a lot of detail, but a commenter at the Herald site says the guy was shot inside a club. Know anything more about it?

Drew

Joe – No, I don’t have any details. But it is amusing that the police releaseed a statement that the shooting had nothing to do with the South Beach Wine & Food Fest. Hmmm, no shit. But I think there is a tendency for local media to play down all this Miami Beach crime in fear of pissing off the City of Miami Beach and the tourism industry players, hence the sketchy details and the late release of the story. I don’t know what’s worse: trigger-happy scumbag corrupt Miami Beach cops or all the criminals wandering the streets at 3am.*… Read more »

The Ace

When will you ever learn The Ace asks rhetorically. The question is not whether property values will raise or fall over the next two years but how much they will fall. Every consensus which now includes the NAR belatedly and the most highly respected “The Ace” as well as the Case Schiller Index and predicts that housing prices including Condos in Miami will drop a minimum of 30% in 2010. How much they will drop in 2011 is still being anyalised by The Ace amoung others and therefore too early to call. This is not open to debate as it… Read more »

900 Fan

The Ace – maybe you should take a page from Enzo’s book and shut the hell up you troll.

GoodNews

Yes, Ace, we’re there already…
Model City is selling at $125/sq ft and is poised for 500 years of 3% annual appreciation.
Since I can’t improve on 900Fan’s wise message, I’ll just join it. “Shut the hell up troll” sounds about right to me…

Charles

I know it is possible to get refinancing on a Miami Condo. I was able to refinance my Condo in Brickell Key at 5% interest for 30 year fixed loan (Loan amount was above $500K). The building I live in has over 15% of the units are HOA delinquent and over 36% are rented out. I should say like similar posters I have very high credit, no other debt, high net worth and make a very good living and finally the loan to value is below 75%.

Gixxer 1000

Ace, “Every consensus which now includes the NAR belatedly and the most highly respected “The Ace” as well as the Case Schiller Index and predicts that housing prices including Condos in Miami will drop a minimum of 30% in 2010.” Where did the NAR or the Case/Schiller index predict condo’s will drop 30% in Miami? An index doesn’t predict future prices people use the information present in the index to make predictions. Could you also qualify your $125 per square foot prediction since we’re nowhere near $125 per square foot. Are you talking about the average or off all condos… Read more »

Gixxer 1000

Renter Tom, “The special approval designation is helpful for each building to move into a healthier financial picture, but simply dropping the purchase prices would be far superior instead of just allowing people to take on debt which is what a mortgage is. It is still a finance game.” I disagree that dropping the price would be superior to allowing people to take on mortgages. I think this is where your desires are clouding your judgment. The majority of people have mortgages on the home they live in. Why drop the price to make the property more attractive to investors… Read more »

Renter Tom

Gixxer 1000 – You mean lower prices are not good for end users? Lower prices would restore the balance in these buildings that would attract end users especially if there are restrictions in place regarding leases to curtail investors/rental units. Right now, IT IS a finance game…artificially low interest rates in order to sustain high prices. People finance because the price is too high to be able buying without it (in other words, perhaps they can not really afford it), if you lowered the prices significantly then more people could afford to buy without having to resort to borrowing money….over… Read more »

Grant

Renter Tom – I don’t think that you are considering that if house prices actually did drop 25% in a day then the banking system would fail and the unemployment rate would sky-rocket and a depression and deflation would ensue. The whole “Recovery” plan (love it or hate it) was to stop the bleeding and not have the utter wealth destruction that occurred 75 yrs ago. The system is what it is; and, it’s leveraged and has been for quite some time. Borrowed money is required in all circumstances to keep this game going. I do agree that if prices… Read more »

Gixxer 1000

RT, You’re missing my point. “If real estate prices dropped say 25% tomorrow, the crisis would be over…” Not for these condos. Even if you drop prices 25% people are still going to need financing. I’m sorry but no one is walking around with $200k+ in their pocket to purchase a condo to live in. And again I’m talking about people who can afford these payments. Let’s say my household income is 110k and I have 60k for a down payment. I can easily afford a $2500 monthly payment. A $300k condo with $60 down would give me a payment… Read more »

Renter Tom

Gixxer 1000 – But that is what the U.S. Govt is doing by requiring so little down…heck even giving tax credits that can be used as part of the down payment. While private business has stopped the real estate bubble music, the U.S. Govt continues to play on… Also, my comment on 25% drop was for an average drop…some more, some less.

Glad Smart Money Magazine is now agreeing with me…a few months late, but….

smartmoney.com/personal-finance/real-estate/short-sales-to-the-rescue

“It’s Looking Like the Year of the Short Sale”

Elvis

Personally I don’t think we are that close on rent vs buy, but getting there. @Gixxer, a good example of a $300K condo, paying about $1300/month for the loan, $500/month in property taxes, and ~$400/month for HOA = $2200/month. Using this example, it seems realistic to pay about $1500/month in rent, that is a big difference between the $2200/month. Also using this example, a 25% price drop won’t make a big difference (about $200/month in lower mortgage + taxes = ~$2000/month), but I would expect a 25% price drop in some of the obviously overpriced buildings to be beneficial to… Read more »

Gixxer 1000

RT, You seem to be talking in circles. What does this have to do with approving mortgages in condos with high percentages of rentals and HOA delinquencies??? And how does more short sale approvals prove your point about how wrong it is that the government is propping up home prices?? The whole reason the government wants to speed up the short sale process is to continue to prop up prices. If more short sales were approved in ’09 we would have had more sales at current prices reducing inventory and the chance that prices will go lower. http://www.miamicondolifestyle.com/blog/archives/629/ Scroll down… Read more »

Renter Tom

Gixxer 1000 – You read too much into my post. The article was separate to the topic at hand. For months and months I have said this would be the year of the short sale and also banks getting rid of REO’s, that was the point. My point was simple, if home prices — OVERALL — dropped significantly, then buyers would swoop in and bring balance back into the market. Since you read the achieves, then you should also note that I advocated keeping mortgage rates down and allowing people to refi into low fixed rates as the only real… Read more »

Gixxer 1000

Elvis,

“@Gixxer, a good example of a $300K condo, paying about $1300/month for the loan, $500/month in property taxes, and ~$400/month for HOA = $2200/month.

Using this example, it seems realistic to pay about $1500/month in rent, that is a big difference between the $2200/month.”

The problem with you argument is that most units that cost $300k don’t rent for $1500.

Elvis

Units in my building (Met 1) that sell for about $500K rent for $2K/month.

I would be interested to know what a $300K condo gets in rent. I know that $1M condos (900 Biscayne 06 line) rent for about $4K/month. That is about $1K/rent for every $250K in purchase price. I know smaller units yield better, but I am not finding many examples to show better than $1K/rent for $200K/purchase price (which is $1500/month on $300K condo).

owneratinfinity

Elvis, you said, Personally I don’t think we are that close on rent vs buy, but getting there. @Gixxer, a good example of a $300K condo, paying about $1300/month for the loan, $500/month in property taxes, and ~$400/month for HOA = $2200/month. Using this example, it seems realistic to pay about $1500/month in rent, that is a big difference between the $2200/month. —> I know that there are 2 large units in Infinity that sold recently in the 305-310k range. These are 2bed 2.5 baths with 1530 square feet. I know these larger size units at Infinity are renting for… Read more »

Kramer

900 Fan*

I was wondering what your observation is of, in particular your building, regarding the mix of renters in your building and if it detracts in any way from the building. Any problems with renters being loud, having wild parties, doubling up with in a one bedroom with 3 roomates etc. ?

Elvis

thanks @owneratinfinity. Maybe we are starting to get to the breakeven point for some buildings and the examples I was looking at are the ones that need a bit more price adjustment. Good to know we are leveling off.

Gixxer 1000

Elvis,

“Units in my building (Met 1) that sell for about $500K rent for $2K/month.”

You might want to recheck the value of units in your building. One bedrooms have been renting at at about $1300 and two bedrooms at $2000. Average one bedroom’s have been selling for $181k and average 2 bedrooms have been selling for $273k.

Enzo

Charles said, “I know it is possible to get refinancing on a Miami Condo. I was able to refinance my Condo in Brickell Key at 5% interest for 30 year fixed loan”

Sure, REFINANCE, might be easier. We aren’t talking about REFINANCE here, are we?

DJ

Elvis, Gixxer, et. al. On the topic of rental prices vs. sales prices…comparable units to mine in my building rent for about $2,200 to $2,500/month. I’m pretty confident I could get a slight premium if I wanted to rent mine due to it being four floors down fron the top, with the most desirable view, and expensive finishes. I paid $361,000 for my unit, and my carrying costs are about $1,100 per month (taxes and maintenance only – since I paid cash). You can run the various calculations if I had taken out a mortgage on varying amounts, but if… Read more »

Charles

Enzo,

I was pointing out you can get financing on a miami condos but that the standards are much higher than in other parts of the country. I know my bank requires on Miami Condo Mortgage (financing or refinancing) the following for 30 year fixed mortgage with interest rate around 5%;

High Credit Score (above 750),
Down payment of at least 25% of the purchase price,
Debt to income equal or less than 2,
Main residence

Again this is for Jumbo Loans (loans above $417K). I am guessing the reason you seem so frustrated is that you do not meet all of these criterias.

owneratinfinity

Enzo You said, Charles said, “I know it is possible to get refinancing on a Miami Condo. I was able to refinance my Condo in Brickell Key at 5% interest for 30 year fixed loan” Sure, REFINANCE, might be easier. We aren’t talking about REFINANCE here, are we? —> I had same easy time as Charles did when it came me financing my new condo I bought 3-4 months ago from the DYL group the developer at Fannie Mae approved Infinity at Brickell building. —-> I got a loan with bank of america. I put down 20% and got a… Read more »

Kramer

Ok 900 Fan…. Thanks – I thought i read previous posts from u that mentioned u rented there. My mistake. Ok. Anyone else? In general for those living anywhere downtown – Are renters an issue? Any anecdotal info you can provide. Someone mentioned here in a previous post that Marina Blue had isuues with renters trashing the place. Comments…….

Enzo

owneratinfinity said, “the bottom line is that peolpe can get financing for new purchases and refis for condos in miami, the peolpe just have to have good credit, etc like charles and I have.” Like I said, people should go ahead and try to find out. I say isn’t that easy, you say it’s. Folks should find out on their own, if it’s easy to get a mortgage for buildings that have over 15% HOA delinquencies and over 30% rental ratios. Don’t believe me, go ahead and try for yourselves. One more thing, owneratinfinity, even though you said that units… Read more »

DJ

“Don’t you find strange that people who bought units already have to be here daily pumping the market and their buildings? Why is that?”

-Maybe they’re happy about their new condos and want to gloat a little a spread the word on their building, which if they bought in, they obviously like.

Drew

Regarding the HOA delinquency and owner-occupied threshholds, the appraiser is not responsible for supplying those figures as Enzo #7 claimed. Nor does the lender ask the buyer to supply those figures as owneratinfinity #6 claimed. Lenders (via their counsel or title agent) request that info from the condo board in the form of a “condo questionnaire” that asks for specific occupancy and financial info for the association. In my experience, there is rampant fraud in the representations made by the condo board officers on these documents as they are trying to get buyers approved so they can move in the… Read more »

900 Fan

Kramer, I don’t live in 900 biscayne. I am just a fan of the building. It offers everything you would probably need in a building and of a higher quality than most with incredible direct east views from east facing units. However if it was in fact a case of 3 people permanently residing in a one bedroom then it is up to the neighbors to complain to the management. Legally as per condo docs you would only be able to have 2 permanent residents in a one bedroom, 4 permanent residents in a two bedroom, etc. While rentals may… Read more »

Kramer

I would love to know the delinquency and owner/renter ratio at Marina Blue. Btw – Hi DJ – Do you know the situation in your building? Also wondering if you have had any problems with the 79 street bridge yet. i know a couple of years ago it was getting stuck in the raised position and stranding cars there for an hour or more.

JL

“So if you’re buying a condo in an unhealthy building make sure the condo board prez or VP is willing to lie to the bank in order to get your loan approved.”

We’re in Miami, OF COURSE they will lie for you, why would you think otherwise… silly rabbit.

Makes Me Think

what is the monthly depreciation on a 250K condo?

DJ

Kramer, There was a board meeting the other day and the developer covered a few stats. There are 164 total units in the building, and of those, he has 13 left to sell that are empty. He personally rents out approximately 40 units. Other than that I don’t know the exact figure on how many units are rented by owners, but I don’t believe it’s very high. Another thing that I’ve found reasuring is that there is no problem with delinquecies in my building. Actually, that’s related to the topic of the most recent board meeting…..it was to approve a… Read more »

Kramer

Just an observation. It seems that the buildings in Brickell – Downtown – Park West/Pace – that went up last ironically may end being the healthiest of the bunch. For example One Miami was the first up – and seems to have an inordinate or un- healthy delinquency and owner/renter ratios as prices came down. I am guessing now that Icon – as an example of the last building to go up may end up more healthy because of this. As Icon fills up over the next year or two with buyers who are purchasing at reduced prices there will… Read more »

Makes Me Think

Drew, 100% correct. I have seen condo associations cook the books on the number of rental/empty units when asked by banks because they need to get those units sold. Do you really think the banks are going investigate to verify those numbers given by the condo assoc?

Charles

Enzo, Not sure how I am pumping my building since I did not give the name of my building. I was pointing out you can get financing (since you kept insisting you could not) but the criteria is much different now – no more free credit – you actually have to have skin in the game (20% or higher down payment), excellent credit and a well paying job. For my work I spend a considerable amount of time outside the USA and enjoy my time when I am in Miami. I could live anywhere but I have chosen Miami because… Read more »

Makes Me Think

gee, I was hoping someone would have posted a response to my question re: post #42.
since we have so many people here doing rent/buy calculations.

owneratinfinity

Enzo, : you siad, One more thing, owneratinfinity, even though you said that units at your building were sold pre-construction, you should also inform that previous buyers have 20 days to block purchases of new buyers. For example, if you try to buy an unit at Infinity now and go through all the paperwork, finance, and mile long contract, and counter offers, etc, etc, etc…after all that time spent, which might take a couple of months, the buyers who bought pre-construction first, and haven’t show up yet for some reason or another, still have 20 days to contest your offer.… Read more »

owneratinfinity

Kramer, Just an observation. It seems that the buildings in Brickell – Downtown – Park West/Pace – that went up last ironically may end being the healthiest of the bunch. —> you are a smart man! that is excatly what I tell everyone – my building is one of the last buildings completed in Brickell so odds are that condos in the building will sell for less then other newer building condos that closed 1-2years ago (example my buddy bought at Q on the Bay in Mid town in 8/08- his view is not as good, and his floor is… Read more »

owneratinfinity

Charles, your to Enzo, Not sure how I am pumping my building since I did not give the name of my building. I was pointing out you can get financing (since you kept insisting you could not) but the criteria is much different now – no more free credit – you actually have to have skin in the game (20% or higher down payment), excellent credit and a well paying job. For my work I spend a considerable amount of time outside the USA and enjoy my time when I am in Miami. I could live anywhere but I have… Read more »

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