Buying Condos in Florida Just Became Harder; Over 100 Projects Lose Fannie Mae Financing

Buying Condos in Florida Just Became Harder; Over 100 Projects Lose Fannie Mae Financing

Residential News » Residential Real Estate Edition | By Michael Gerrity | February 22, 2011 12:53 PM ET

According to a new report from South Florida-based Condo Vultures, over 100 new Florida condominium projects - including 28 in South Florida - have lost their financing approval certification from Fannie Mae in the last six months, making it more challenging for buyers to obtain mortgages when purchasing units in any of these buildings.

As of Feb. 21, 2011, there are 160 new, Florida condominiums with the required financing certification needed for lenders to provide mortgages that would qualify to be resold on the secondary market to the public-private entity Fannie Mae and others that adhere to the same criteria.

The number of approved new, Florida condos could have been even lower if not for 31 new condominiums - with six projects in the tricounty South Florida region - obtaining Fannie Mae certification within the last six months to help offset the number of projects that did not have their approvals renewed, according to an analysis of Fannie Mae documentation.

"Financing a new condo in Florida just got tougher for those buyers who lack the cash to purchase a unit with no mortgage," said Peter Zalewski, a principal with Condo Vultures LLC.

Zalewski further stated, "After a surge in new condo project approvals in 2009 and the first half of 2010, dozens of projects have failed to renew their certification with Fannie Mae. The unanswered question is, did the scrutiny become more stringent or did the projects simply decide the approval was unnecessary given the resistance by banks to originate mortgages for new, Florida condo purchases."

In September 2010, there were 237 new condominium projects in Florida approved for financing by Fannie Mae. Some 30 percent of the approved new, Florida condo projects were located in Miami-Dade, Broward, and Palm Beach counties.

Fannie Mae certification is essential for lenders that originate mortgages with the intention of reselling the loans on the secondary market. Residential loans that fail to meet Fannie Mae's guidelines are typically maintained for the term of the loan by the lender that originated the mortgage.

The condo crash in Florida, and South Florida in particular, has created challenges for Fannie Mae, which has a mission of providing liquidity to the residential financing market.

After failing to approve any new Florida condo projects for financing in 2008, Fannie Mae adopted looser terms in 2009, clearing the way for nearly 90 projects to obtain the necessary certification. The approvals continued in 2010 with more than 120 Florida condo projects approved for financing, according to the report.

Many of the new condo financing approvals were granted for periods of nine to 18 months, giving Fannie Mae the ability to revisit each project's certification.

The number of Fannie Mae-approved projects has dropped rapidly in the last two quarters statewide and in South Florida, according to the analysis.

In the state, 108 new condo projects are no longer on Fannie Mae's list. Of the statewide total, nearly 30 projects are located in South Florida.

Miami-Dade County, where condo developers put up more than 35,000 units in Greater Downtown Miami, South Beach, and Sunny Isles Beach alone, has had 17 projects drop off the Fannie Mae list.

Palm Beach County, where developers put up more than 4,500 new units in Downtown West Palm Beach and Boca Raton alone, has had nine projects dropped off the Fannie Mae list.

Broward County, where developers constructed 10,000 units in Downtown Fort Lauderdale and the Beach and Hollywood / Hallandale Beach areas, had two projects not renewed.

As previously approved South Florida projects have fallen from the list, four new projects were added in Miami-Dade and two new ones in Broward County. No new projects have been added to the Fannie Mae list in the Palm Beach County since September, according to Condo Vultures.

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