March 18, 2009

A Tighter Fannie...For Condo Mortgages

"[Fannie Mae] stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won't back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity."

Fannie Tightens Its Conditions for Backing Condo Mortgages [WSJ]

First Published: March 18, 2009 3:00 PM

Comments from "Plugged In" Readers

What does that mean for all the victorian --> condos in SF that only have a couple units? With fewer than 10 units, owning one unit means that more than 10% of units are owned by a single entity.

Posted by: hotep at March 18, 2009 3:05 PM

Best headline this week !

Posted by: The Milkshake of Despair at March 18, 2009 3:23 PM

Well, this can't be good for SOMA.

Speaking of SOMA, RN-74 looks like it's coming along very quickly in the Millennium. Can't wait for it to open. Anyone know when the restaurant (or grocery store for that matter) in Infinity is opening? Doesn't even look like they're working on it...

Posted by: phatty at March 18, 2009 3:30 PM

Of all the post I have seen, this one concerns me.
It is one thing for us all to debate Infinity, Rincon, Millenium etc. based on opinion but per the above the facts are the facts and this is not good. I wonder if the developers will revert to funding the loans themselves? I just don't see how playing by the new rules would be efficient for the developers pocket books, motivating people to buy, moving units etc. Interrestingly enough I am as an Infinity owner still seeing units around me closing, lot's of them. I love it here so plan to stay put for some time. After living in many buildings I can say the property and developer team are top notch. I have not heard info on the retail area for some time myself if anyone know's anything I would appreciate hearing it.

Posted by: gowiththeflow at March 18, 2009 3:47 PM

Anyone know when the restaurant (or grocery store for that matter) in Infinity is opening?

Both look dead to me; no work being done, empty shells.

Posted by: unearthly at March 18, 2009 3:53 PM

Doesn't this sound backwards?

One would think that if you wanted to stem the tide of foreclosures that you would want to make it easier, not harder, to get a loan in a building where there are a lot of foreclosures?

I would think this hurts everybody living in distressed buildings (ala Beacon)...but I'm no mortgage expert.

Can someone please comment?

Posted by: Rincon Hill Billy at March 18, 2009 3:57 PM

Do the new condo complexes around town generally include a financing contingency in the pre-sale contracts? If so, these tougher requirements may provide an out for more people. Note that the WSJ report says that Freddie Mac has not adopted these policies.

This makes sense from a risk management standpoint -- why lend to those who want to buy in what appears to be a building that indicates further declines. But it is a bit out of character with the overall scheme to try to hold back the tide of housing declines.

Posted by: Trip at March 18, 2009 4:14 PM

One would think that if you wanted to stem the tide of foreclosures that you would want to make it easier, not harder, to get a loan in a building where there are a lot of foreclosures?

There are competing interests here.
1) it is in the interest of the taxpayer to reduce foreclosures
2) it is in the interest of Fannie executives to limit losses.

It is known that losses are higher in buildings with foreclosures, and also in buildings that are partially vacant.

thus, the taxpayer may want to stem the tide, but Fannie execs know that these types of properties are too high-risk.

It's the execs who call the shots.

This is the problem when you have a taxpayer-funded organization that's run as though it's private (when it's not).

Fannie/Freddie will be even more averse to risk given the situation at their unholy triplet sister AIG. AIG keeps going back to the trough, and each time they look more and more contemptible. Fannie/Freddie don't want to do that. (actually, they're going to have to go hat in hand too... but they're trying to delay it).

kind of funny, huh... not long ago people were so happy when they raised the conforming loan limits... and I still remember when people talked about all the "profit" that would come of these bailouts! ROFL.

Posted by: ex SF-er at March 18, 2009 4:18 PM

"In other developments, [Fannie Mae] announced it would stop guaranteeing mortgages on open-doored barns from which more than 70% of the horses have already escaped, up from 51%...."

Posted by: Debtpocalypse at March 18, 2009 4:22 PM

Strange that Fannie is finding some religion after a decade long bender. Timing on this is very ironic. Curious to see if the MSM will pick it up.

Posted by: The Red Pill at March 18, 2009 4:23 PM

for those knowledgable in SF condos, are there buildings out there that are currently or at risk of suffering "15% of current owners are delinquent on association fees"?

Posted by: condoshopper at March 18, 2009 4:42 PM

Posted by: Dude at March 18, 2009 4:55 PM

Condo developments can apply to be exempt from the above conditions. I wonder what qualifies a development to be exempt- and also if the new developments in SF have done so already?

"Fannie Mae has reportedly said that the new rules protect borrowers from buying units in buildings that have a high risk of failure and prevent the companies from throwing good money into troubled developments. Developers can petition Fannie Mae for an exemption from the rule and 50 exceptions have been made so far."

Posted by: Reader at March 18, 2009 5:43 PM

I'm starting to feel like one of those old-time Kremlin-ologists. Since FM is not really a business and we have to assume that everything they do is vetted and approved by treasury and the Fed we have to wonder why treasury and the Fed would be in favor of this? This isn't going to slow down the repricing.

Posted by: diemos at March 19, 2009 7:29 AM

We’ve done our best to carve the comments about the Fed’s recent actions from Fannies (although some might argue that the Fed and fannies have a lot in common).

For the discussion on the Fed’s ramping up our U.S. printing presses head here: QuickLinks: The Fed Covers The B-52’s (Legal Tender).

And now back to a tighter Fannie...

Posted by: SocketSite at March 19, 2009 8:47 AM

I'm starting to feel like one of those old-time Kremlin-ologists. Since FM is not really a business and we have to assume that everything they do is vetted and approved by treasury and the Fed we have to wonder why treasury and the Fed would be in favor of this? This isn't going to slow down the repricing.

using my tinfoil hat it's probably that they're hemorrhaging cash. AIG pissed in the "go to mama govt" pot. taxpayer is feisty for right now. so Fannie's CEO is not looking forward to more hearings...

they need to slow losses until the taxpayer settles down... then it can be bailout-as usual.

unfortunately, most people don't see the egregious theft that occured right under their noses. (not the $170M AIG bonuses... rather the $5-10 TRILLION bank giveaways).

thus, Fannie is likely bolstering it's balance sheet until it is safe to go begging for money again. what's the attention span of the average taxpayer these days?? a few weeks... I hope I'm wrong and the taxpayer rage builds over time and the bailouts get tougher and tougher, but I'm not optimistic.

Posted by: ex SF-er at March 19, 2009 8:54 AM

I'd say screw 'em. Setup direct government lending (through SBA) and stimulus spending to create new small businesses, new technologies and provide financing for businesses (NOT BANKS) -- the vast majority of employment in this country is small business. It's the American way.

Let the banks and insurance companies fall on their own swords.

The world will go on without them (and new companies will spring up in place of the old dinosaurs). This credit crisis is their meteorite.

Posted by: Jimmy (No Longer Bitter) at March 19, 2009 9:27 AM

"Setup direct government lending"

It's one way to bring the benefits of seignorage back to the people. Have government take over the mortgage market making 5% loans at 3x income and 20% down. 5% of 10T is $500B a year which could then be used to fund the government in place of other taxes.

Posted by: diemos at March 19, 2009 9:39 AM

In an era of internet, etc., I don't see why government can't rapidly and efficiently dole out money using conservative lending standards to the people who actually deserve it (and make profit in the process).

This convoluted bailout is going to end very badly for regular people.

Posted by: Jimmy (No Longer Bitter) at March 19, 2009 9:49 AM

Jimmy:
I hate to tell you this, but our politicians are ruled by the bankers.
they don't even think to question the bankers. They "defer" to their wisdom.
(there is no "control" they simply don't think to look elsewhere for answers)
that's why they only listen to Paulson and Geithner and Bernanke, and ignore Stiglitz and Krugman and Buiter.

your concerns will never reach Mr. Obama's ears, no matter how smart or eloquent you are. His ears are takn by Larry Summers and Geithner.

It was only a few weeks ago that Mr. Obama discussed how the bloggers don't know what they're talking about, because "they haven't looked at the situation in detail" (paraphrased).
Nevermind that it was the bloggers who were heralding concern (Mish, Calculated Risk, Buiter, others) while the "banking experts" denied there was even a bubble. never mind that the Federal Reserve had to go to a blogger (Calculated Risk/Tanta) to understand the so-called "subprime problem".

I went and spoke IN PERSON to my congressperson about Fannie and Freddie WELL BEFORE "the experts" were worried. WELL BEFORE they were taken into receivership. I said "Fannie and Freddie are insolvent. we musn't raise conforming limits". My congressperson said "Well I talked to Mr. Bernanke and he tells me they are well capitalized, and he is an expert you know".

I went back prior to the AIG bailout with a big warning as well. I couldn't even get in to see them... just an aid. But I was told that "The Treasury secretary is one of the smartest men alive and ran the best banking firm on Earth, I'm sure he's thought of everything". Later I got an email that said paraphrased "well, we did have to take over AIG, but the expercts assure us that the taxpayer will make a profit on this transaction."

check. mate.

thus, the govt will only lend directly to the consumers once the bankers say it's a good idea. until then, they will continue to use the banks (and banking like entities) to spread the cash. too bad the bankers are just hoarding it for themselves.

Posted by: ex SF-er at March 19, 2009 11:05 AM

"I went and spoke IN PERSON to my congressperson about Fannie and Freddie WELL BEFORE "the experts" were worried."

This is very admirable, but what did you expect your congressperson to do? You are a medical doctor, right? What outcome did you expect?

Weren't you the one saying "Bernanke is a genius?"

These are not a rhetorical questions, but I don't blame you for ignoring them.

Posted by: dub dub at March 19, 2009 11:12 AM

Well, ex SF-er, kudos to you for going and meetingwith the congresscritter, but as my 5-year old tells me all the time when he beats me on wii tennis - "Conserve energy!".

The political process is a joke. I don't really get angry about it anymore. The sheeple are getting exactly what they deserve. So much willingness to believe in some benificent god-like "government" that actually cares about the peasants. It's frustrating for small-government types like me, that's for sure.

Posted by: LMRiM at March 19, 2009 11:17 AM

Weren't you the one saying "Bernanke is a genius?"
yes. he might be the smartest person I've ever met.
that doesn't mean he's always right.

Stephen Hawking has made physics errors. Bernanke will make economic errors. Bernanke's "errors" are primarily due to the fact that he is not looking out for the taxpayer, he is looking out for the banks. that makes since because he is THE central BANKER!
He is constrained by the erroneous idea that the economy can only be saved by a healthy banking system, and that the banking system must consist of the current insolvent banks.

You are a medical doctor, right? What outcome did you expect?
exactly what happened.

"Conserve energy!".
IMO one has no right to b*tch if one isn't going to do anything about it.

I slept better after my failed meetings.

FWIW: I'm probably going to speak w/ my congress person again next Wednesday or the Wed after that.

Posted by: ex SF-er at March 19, 2009 12:19 PM

LOL, ex SF-er.

I'm doing plenty about the situation. I'm increasing my net worth and figuring out how to position to take advantage of what is coming, as best I can. "Enlightened self-interest" - the libertarians would be proud. I also try to help some friends and family (even diemos' "dysfunctional SS family") with what meagre market and asset price insights I've been able to accumulate over the years.

FYI, I don't think Bernanke is constrained by some mistaken idea. He's just a plant, after all. What does he understand about the motivations on Wall Street? Back during his confirmation hearings, his disclosures showed that his entire accumulated net worth (at 50 years old or so, after having worked for 20 years generation) was about equivalent to the annual bonus of a moderately successful 26 year hedge fund trader in the mid-90s (I can't imagine what these guys were making in 2005!). He is constrained by the bankster bullies he answers to, and he is in no position to go against the cabal.

Perhaps at some point he convinced himself intellectually that his approach is the only plausible one (in which case the banksters simply found an amiable nerd who would serve as a useful idiot for their purposes). None of these politicians is his own man, that's for sure, and Bernanke is a politician in the end.

Posted by: LMRiM at March 19, 2009 12:34 PM

ex SF-er - Keep up the pressure. Congress is rotten to the core (and incompetent) - but what else can you do? Is your congressman from one of those IL districts that gave us Rahm Emanuel, Rostenkowki and Blagojevich (or maybe that big Cubs fan Hillary Clinton)? What's the price of admission for an audience with one of these characters? Probably less than it would cost us to go see Gulfstream Nancy in person. Good luck!

Posted by: FSBO at March 19, 2009 1:36 PM

LMRiM:
I've found that income/assets are not always a good gauge to figure out intelligence or who is in control

The President is arguably the most powerful person in the world, as is the Fed Chairman, and the Joint Chiefs of Staff. None have high income potential.

no matter how smart Wall Streeters think they are, they still should have a healthy fear of their "lessers" in government.
Especially since Mr. Bernanke serves the banks, not the rest of the financial sector.

the hedgies and the shadowbanking system is finding that out now. they will be sacrificed to the banks along with the taxpayer.

The AIG rage was a warning. no matter how insulated they feel, Wall Streeters could suffer tremendously if a true populist movement got going. Mr. Obama may be sympathetic to that.

====
FSBO: my congresspeople are in MN where I now reside mostly. (we changed last year)

Posted by: ex SF-er at March 19, 2009 2:19 PM

LOL, ex SF-er. Obama was hand picked and vetted by the establishment - they all are. He's not going to rock the boat (in fact, he's going to listen to the banksters who are trading the population's future well-being for his political power aspirations), It's pretty clear he has no grasp of what's going on anyway. Bush tried to go just a teeny tiny outside the bankster cabal for a little while (Snow, O'Neill) and was pushed back into the embrace of Government Sachs with Paulson. Not even a pretense with the current administration - the old gang is all there (Rubin, Summers, Geithner, Dudley).

No question intelligence and ability are not always correlated with wealth or income. But I'm talking to understanding motivations here - emotional intelliegence I guess. I just don't think that someone like Bernanke - who was content to publish papers and teach kids at Princeton for years - can understand the deep psychosis of half of the Wall Street cabal. I'm only talking about some percentage of people in the financial industry, of course. But these guys call the shots.

While the sheeple are up in arms over the AIG peanuts, over $90 billion of the AIG bailout (as of year end 2008 - more now I'm sure) has been siphoned out of the pockets of the taxpayer/general population, straight into the pockets of Goldman, Deutsche Bank, SocGen, etc. "Systemic risk", you see. I'm reminded of the old Pitt quote (contemporaneous with the French Revolution):

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves."

As I am always saying, the theft is in plain sight, but as long as the politicos can keep up the circuses to distract everybody, nothing is going to change.

Posted by: LMRiM at March 19, 2009 3:03 PM

I have to admit I enjoyed watching Chris Dodd on CNBC squealing that he put the lanuage in the stimulus bill that (I guess?) enabled AIG to get it's bonus money.

He's up for re-election in 2010, that's not gonna be fun.

Posted by: jessep at March 19, 2009 3:22 PM

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