Isn’t this how we got into the mortgage mess? Democrats in Congress are asking Fannie Mae and Freddie Mac to relax mortgage standards again.
That’s right. Barney Frank (D-Mass.) and Anthony Weiner (D-N.Y.) are asking Fannie Mae and Freddie Mac to ease mortgage standards that require 70 percent of condos in a complex be sold before they guaranty any other loans to buyers of other condos in the development. The number used to be 51 percent.
You see, when you’re about to lend a bunch of money to someone or a family to buy a condo, you need to take a look at the quality of the investment. If less than 70 percent of the condos are sold in the complex, you’ve got to wonder if there will be problems in the future with the complex. Is it a good investment? Should you be guarantying a loan in that complex?
Frank and Weiner just can’t let the market work on it’s own, and these government sponsored agencies (GSEs including Freddie Mac and Fannie Mae) should just stay out of it all together.
I’m wondering what the rules are at local banks? Anybody know how they compare? Let me know and I’ll post here – or just drop the information in the comments. From Reuters today…
Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.
In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.
In a letter to the CEO’s of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold “may be too onerous” and could lead condo buyers to shun new developments, according to the paper. …
… Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble …
No kidding? If I was in the market for a condo, that is exactly the type of information I would be interested in finding out! Why would you want to buy a condo where the association was falling apart due to a lack of funding?
Will we see Frank and Weiner proposing legislation to keep that information private in the future?