Condo associations could face sink-or-swim moment under new lending rules
In some cases, associations “are not hiring the correct management company in order for them to get their association warrantable,” he told Mortgage Professional America, pointing to poor property management as a root cause of associations falling out of compliance.
State first-time homebuyer bond programs also add another layer of scrutiny. “There’s a lot of bond programs. They’re all very similar in terms of requirements across the country, whether you’re in Massachusetts, Rhode Island, New Hampshire, or Pennsylvania,” he said. “A lot of them require a high owner occupancy.”
The need to meet owner-occupancy thresholds, he said, is likely to remain a persistent challenge for associations seeking bond-program financing – a borrower-level requirement, distinct from the GSEs’ project-level investor-concentration rules, which Fannie Mae and Freddie Mac have loosened at the federal level. “The problem is making sure that it’s a warrantable condo. That’s really kind of the key,” he said.
Pressure builds toward single-family homes
Tightening warrantability standards are likely to put downward pressure on condo prices, according to Iliopoulos. That could mark a potential affordability boost for some buyers – but the headwinds facing the sector might also push demand toward single-family homes, especially if mortgage rates ease from their current levels.
The 30-year fixed rate averaged 6.49% for the week ending July 9, according to Freddie Mac’s Primary Mortgage Market Survey, down from 6.72% a year earlier, though Bankrate’s national survey put the average back up to 6.64% as of July 14.
