Will Fannie Lend A Hand In Miami Beach?

fannie_mae_logoI received a call from Julie Mc Gauldie last night, the Fannie Mae SAD (Special Approval Designation) liaison at the Continental Group spearheading Fannie’s push to assist financially shell-shocked Miami Beach condos. We’d been talking about the Yacht Club at Portofino in particular, and other Continental managed buildings in general.

As the pre-eminent Miami and Miami Beach condo management purveyor, Continental was contacted earlier this year by the Fannie Folks to help coordinate Continental-managed at-risk buildings develop a business plan to work through their “crisis mode”, and in doing so, obtain the SAD, which relaxes traditional lending requirements. “The good news”, said Julie, “is that the Yacht Club is not at risk, and does not require special assistance.

We have other buildings that aren’t so fortunate.” Julie went on to talk about some of the nightmares we’ve all read about: foreclosure-riddled buildings sucking the life and money out of the remaining paying owners, investors walking away from their deposits and would be units, rampant delinquencies leading to diminished staff and services, or even worse, the pillaging of the reserve account to fund operations. All of these scenarios have the same downward spiraling effect, as conventional lending criteria precludes these buildings and robs potential buyers of the opportunity of securing a loan.

“Fannie Mae has two objectives”, explained Julie, “to minimize the risk of taking back (Fannie owned) units at foreclosure, and to stimulate lending and relax criteria under certain conditions where ‘sound decisions’ moving forward may be effective in averting or circumventing the crisis.” But will it work? It probably depends on just how bad the crisis is.

Generally speaking, educated buyers would steer clear from problem buildings, but that being said, there’s a lot of incentives out there today that could tempt even the savvy, otherwise risk-adverse buyer, the foremost being price and value. And then there are limits to consider. The normal loan limit on a Fannie Mae mortgage is $417,000 for a single-family home, but in certain “high cost areas” this amount can be increased substantially.

Unfortunately, in Miami-Dade, the limit is only $423,750, which provides little assistance to those seeking financing for two-bedroom plus purchases in most luxury Miami Beach condo buildings. Julie concluded by saying that all buildings were being evaluated on a case-by-case basis, and even if a building is not on their radar, Fannie Mae would take a look if qualified buyers were being rejected for reasons other than creditworthiness.