If you're looking to buy an investment condo at a great price in Florida, you just might want to get your loan application nailed down and in before January 15th.
Why? Because that's the cutoff date when Fannie Mae toughens its policies on condo properties in the Sunshine state -- potentially putting a damper on investors who are bottom fishing for bank foreclosures and short sales.
In instructions sent to lenders before the Christmas break, Fannie Mae said that deteriorating market conditions in Florida -- and Florida alone among the 50 states -- forced it to require higher minimum downpayments and more extensive underwriting reviews before funding new loans.
To better protect itself from future losses, Fannie said it will now require all loan applications for units in new and existing condo projects in Florida to go through an intensive review process by in-house underwriting teams to evaluate the building, its finances and local market conditions.
Previously Fannie Mae allowed lenders to conduct their own expedited reviews. The new in-house reviews not only will take longer but also cost lenders money -- as high as $15,000 for units in large projects, $3,000 or $30 a unit for projects with 100 units.
Lenders presumably will look to borrowers to pay the extra costs ... and the additional time required for reviews could complicate some transactions.
Even with more intensive project reviews, Fannie Mae said it wants higher equity up front from non-occupant investors and second home condo purchasers -- a minimum 15 percent from investors and 10 percent from second home buyers. Investors will not be permitted to obtain mortgages -- at any downpayment amount -- in newly-constructed and recently-converted projects on or after January 15th unless a full Fannie Mae project review has been completed.
Fannie's forthcoming squeeze on the financing pipeline comes in the wake of negative projections on where condo pricing might be going in the year ahead. For example, Jack McCabe of McCabe Research and Consulting, an expert on condo construction and sales in the Miami-Dade area of south Florida, told the Miami Herald recently that he sees even lower values in 2009- down another 10 to 15 percent.
Bottom line for investors here: Make sure you've done extra due diligence on condos in Florida, and be aware of the financing pinch coming from Fannie Mae in mid-January.
Despite McCabe's bearish predictions, there probably ARE some great deals on condos in Florida. You just need to work super hard to make sure that what you're buying makes financial sense for you over a multi-year horizon.