San Mateo condo values may suffer with the imposition of the new, stricter underwriting rules for condominium complexes announced by Fannie Mae and FHA. We expect San Mateo condominium prices to drop in the near future as Fannie Mae and FHA’s stricter qualifying guidelines are implemented.
New Guidelines for Financing Condos Put Out By Fannie Mae and FHA
Underwriters will soon be required to take a more critical look at the financial health of the complex’s Homeowner’s Association (HOA). Some of the new rules include provisions that…
- No more than 15 percent of condominium owner’s fee payments (HOA dues) can be more than one month delinquent
- No more than 20 percent of the total square footage of the complex can be used for nonresidential purposes. Projects where more than 20 percent of the total space is used for non-residential are ineligible for Fannie Mae and FHA loan programs.
- No single entity may own more than 10% of the total units
- The HOA’s budget must provide sufficient replacement reserves for capital expenditures, deferred maintenance, and adequate insurance deductible funding
- Lenders must verify that hazard insurance for all condominium complexes with attached units covers fixtures, equipment, and other personal property inside individual units requiring “walls-in” coverage
- At least 70% of the units in each complex must be owner-occupied.
What About San Mateo Foreclosures?
Rules impacting condos in foreclosure (bank owned condos) are being formulated.
Which San Mateo Complexes Will Be Hurt Most?
Challenging new rules will particularly hurt “sick” Homeowner’s Associations who are mismanaged, underfunded with lax enforcement collection policies, guilty of careless bookkeeping, inadequately insured, or those who fail to exercise financially sound business practices. Fewer complexes will quality for Fannie Mae or FHA financing as scrutiny intensifies.
What Can HOAs Do to Prevent Any Problems With Their Complexes?
Condominium owners, HOAs and property managers are cautioned that doing things “on the cheap” may render the units in the complex unsaleable. Condominium owners, HOA Directors, Board Members, Property Managers and HOA Consultants are advised to put your financial house in order now.
What About San Mateo Condos in Litigation?
Lenders are allergic to condominium complexes in litigation, or with unresolved litigation issues. Fannie Mae and FHA financing will be unavailable for complexes where the HOA is a plaintiff in a lawsuit or anticipates filing a lawsuit – usually against the developer for construction defects – or has settled a suit and cannot demonstrate sufficient funds to repair defects.
How Will FHA’s New Guidelines Affect San Mateo Condominium Sellers?
It’s going to be more difficult to obtain new purchase money loans on all condominium complexes, so selling your unit will be more difficult as well. It will take longer to get approval – if the complex is not already approved – and even longer to close escrow. Don’t expect the buyer to get loan approval in less than 21 days – at best. Pressing the buyer to remove their financing contingency sooner and close escrow quickly will be fruitless, the lender controls the process.
How Will FHA’s New Guidelines Affect San Mateo Condo Buyers?
Condominium financing will be uncertain. Get your lender involved early in the buying process – even before you write your offer. Condominium buyers may find it nearly impossible to get bank financing for non-approved complexes. We suggest that an HOA Documentation Review Specialist be retained as part of the buyer’s due diligence.
Complex Already Approved? It Will Suffer the Least Amount of Price Erosion
It stands to reason then, that condos that are approved for Fannie Mae and FHA financing will be in higher demand. And conversely, complexes not yet approved will be worth less and those complexes that cannot get Fannie Mae and FHA approval will suffer significant erosion in value.
Want to Learn How These New Guidelines Will Affect Your Purchase? Come to Our Free Condo Class
We’ll be presenting a live class, Steps to Buying Condos in San Mateo, where we’ll explain these new rules and how they’ll impact your home purchase. To get more information about this program and to sign up, click on the Sign Up button below.
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Raymond Stoklosa, Chela Stoklosa and Rebecca Williamson are Realtors with The RayChel Realty Group specializing in Santa Clara and San Mateo Real Estate.
Raymond Stoklosa, Broker/Co-Owner
Chela Stoklosa, Realtor/Co-Owner
