(Some) new Mortgage Woes for Anyone in the New Contruction Mortgage Market

As many bad experiences as I am subjected to when working with inept or indifferent mortgage brokers, I really do appreciate the good ones. One such Mortgage Broker is Richard Cohen of Professional Mortgage Partners. I have been fortunate to have worked with Richard several times over the last few years. Aside from being a customer-oriented and hard working lending professional, he is a nice guy and a good writer.

Richard recently described the currently mortgage for buyers and sellers of new construction condominiums - (stop me if you've heard this before) - things are getting tougher.

He writes:

In the last several years, buyers of new condo projects had little difficulty in obtaining loans. It didn't matter if the condo was warrantable (in essence: certified by the lender that the condo meets Fannie Mae/Freddie Mac condo guidelines) or non-warrantable (not certified to the guidelines). A buyer could be the first one in the complex and have no issues.

Things have changed in the last 30 days. Because of the losses in the market, Fannie and Freddie have gone back to the old days. For new construction, depending on the project, loan, and other factors, a buyer will probably have to wait until the appraisal has been performed,a condo questionnaire has been completed, and, in some cases, the lender has reviewed other documents such as the condo budget, decs and bylaws, etc.

It is going to be more difficult and time-consuming to fully approve condos. It's not the loans, but the condos themselves.

Here's my two cents how to work with this:

Buyers should ask their loan officers if they are aware of the changes. If they get a blank stare, find another lender.

Agents should make sure that they have the various docs ready to send to the lender for review.

Both buying and listing agents should make sure that the lender can do both warrantable and non-warrantable condos.

Listing agents and developers might want to have a preferred lender who can have the entire project warranted so that prospective buyers have a guaranteed lender.

All too often, I see "lesser" lenders who neither understand these market changes, or simply choose not to adapt or are slow to change when they occur wait. Such lenders tend to wait until week of closing to begin the process of trying to secure condo project approval. Inevitably, delays ensue, frustrations rise-up, and good will is lost. In the worst cases, lender delays have cost buyer's money in the form of delayed-closing penalties or the loss of earnest money.

I've long counseled clients to make sure they are working with knowledgeable, experienced, aggressive lenders, and to start the mortgage application process as early as possible on the timeline of a real estate transaction. This is just another example of why I do so.

FHA Loans and Condo Sales - Is Relief on the Way?

By all outward appearances, state government in Illinois has ground to a complete halt, with all eyes focused on the Governor's "problem" and all the related fal - der -rah. Its hardly business as usual in Springfield, but not everything has ground to a halt. Several new bills have been introduced this week. That is not to say that they will be of benefit to we the people. Nonetheless, the cogs and gears are turning, and we are hoping for the best. One such proposal comes from Rep. LaShawn Ford of Chicago's west side, who is himself a real estate broker and entrepreneur . He is the author of House Bill 155 , introduced & referred to the Rules Committee Wednesday. It seeks to address one of the most common problems I am seeing in condominium resale transactions these days; the tension between many Declarations of Condominium and FHA loan guidelines. Many Condo Declarations provide Associations with a "right of first refusal," which basically allows t

So.... about the blawg

Nov. 2022 Hello Dear Reader. I started blogging on this site 15 years ago. Crazy right? May or may not Chicago's longest-running blog about real estate law. I think so, but who knows, Whether it is or isn't doesn't, of course, really matter. Either way, it's been a blast. But things change. We've pulled up the tent stakes here and are relocated on other platforms. Want to follow along? Join us on the mothership I'm also writing on LinkedIn Thanks for everything.

PLM Title Shuttered

Title insurance is a critically important part of any real estate transaction; or at least it should be. The title company guaranties the "quality" of an owners interest in the property - that there aren't any (unknown) liens or defects. No buyer that I work for will purchase a property without it. Title insurance is only as good as the insurer. We want to know that the insurance company, like the Rock of Gibraltar , will always be there. We want to sleep easy at night, knowing that the client is protected. That said, it was a bit distressing to see that PLM Title Company shut its doors, without any forewarning last week. Worse still, this morning's news is that there is a criminal investigation underway - and that we do not yet know why. Old timers like me shudder with memories of the great Intercounty Title debacle five years ago. Here's to hoping that this one is nothing like that one. Set aside the problems involved trying to make a claim against a defun

Anonymous said…

Mike

Thanks for your recognition.

Your main point about starting the process early is THE most important. I (kind of) make this point in my book: getting a mortgage is not like baking a cake. If you forget an ingrediant, you can run to the store and pick up some more flour and finish the cake. With mortgages, missing an "ingredient" (i.e. buying a non-warrantable condo) can shut the deal down and the borrower can lose a lot of money.

You have a wonderful blog. Keep it up!

Richard

January 29, 2008 at 11:18 AM

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