New FNMA Condo Guidelines Chilling to Panama City Beach

FNMA released new condo eligibility guidelines for mortgages acceptable to be purchased by FNMA in Announcement 08-34.  These new guidelines are directed specifically toward condominiums located in Florida.  The guidelines specify particular situations that place additional restrictions on condominium mortgages that FNMA will purchase in the secondary market.  The new guidelines have an effective date of January 15, 2009.

Some of the highlights are:

  • Reduced loan to value ratios.
  • 70 percent of the total units in a project must have been sold or under a bona fide contract to a principal residence or second home purchaser.  This could affect new buildings such as Trade Winds, Ocean Reef, Origin of Seaheaven, Grand Panama, Shores of Panama, Etc.
  • No more than 15 percent of the total units in a project can be 30 days or more past due on the payment of their condominium/association fee payments.  This includes the unsold units where the developer is responsible for paying the HOA fees.
  • Increased insurance requirements for the HOA and the unit owners.
  • Projects are ineligible where a single entity (the same individual, investor group, partnership, or corporation) owns more than 10 percent of the total units in the project.  This may affect Emerald Beach where the Wyndham Corporation owns more than 50 percent of the units.  If a hedge fund comes in and buys 10-20 percent of a project, say the Trade Winds, it could mean that FNMA would not purchase any mortgages of the remaining units.
  • Review of the project HOA budget and income statement, especially for projects where the developer is still in control of the HOA.  This could be a problem for projects where the developer has not fully funded the required HOA fees of the unsold units.
  • Projects are ineligible where the HOA or developer (if he is still in control of the HOA) is named as a party to current litigation that relates to the project.  This could affect Shores of Panama that is in bankruptcy or projects where the developer is being sued for nonpayment of construction work or services.

Lenders are also increasingly reluctant to lend on what they consider to be condo-tels.  FNMA may consider projects with any of the following characteristics as condo-tels:

  • Front Desk/Registration Service
  • Central telephone system
  • Daily cleaning service
  • Advertising rental rates
  • Central key system
  • Few or no full time residents
  • Short-term rentals

There are exceptions to all of the rules.  However, if you have a great contract from a well qualified buyer, don’t be surprised if the loan gets rejected by the lender.  Additional loan collateral requirements will mean fewer sales and a longer market recover period.

Sam Portman,

12 thoughts on “New FNMA Condo Guidelines Chilling to Panama City Beach

  1. If the information in this article is accurate this is terrible news. With the massive amounts of inventory on the market and plenty of developers units not on the market there will be few people who will be able to pay cash for these units.


  2. Unfortunately, I own a unit in Emerald Beach Condo I.
    At present Wyndham actually owns less than 50% of the units in the “Project.” Condo I has 283 Units, 9 Commercial and 272 residential. Condo III (Wyndham) has 267 units, 1 commercial and 266 residential. Although they act like they own the entire project, they don’t. From what I have heard they plan on purchasing the remainder of the units in the project when built. Construction was started on Condo II but I been told its now on hold due to “Market Conditions.”

    How does Fannie define “Project.” Legally speaking, EBR Condo I is a seperate enity, not controlled by Wyndham.

    Jim Morin


  3. Jim,
    Unfortunately, each lender decides how to interpet the requirements. It’s a moving target. You could make a good case that Emerald Beach Condo I is a seperate enity.



  4. Jim,I have a person that is trying to refinance his condo. There are only 8 units in the building. One person owns 2 of those 8. 5 of the 8 are owner occupied. I cannot seem to get financing because of the 10% rule. Im assuming this applies to properties that only have 8 units or less. Please advise.thx scott


  5. Vision Bank has successfully closed several units, such as Origin, just this month with our in house programs. Give one of us a call and we will be happy to help you.


  6. We just closed on a pre-construction condo loan through Vision Bank’s in house program. Jeanne Royer was wonderful to work with.


  7. I know that this may not be related, but my husband and I invested in the Tradewinds, which are now defunct. I personally hope that they put some very strong regulations in place for these pre-construction sales, especially people like the developer of the Tradewinds. I hope that future condo owners will check the background of these developers. It is too late for us, very sad indeed, that these developers are still out there operating.


    1. I purchased a condo in the Tradewinds project and have been trying to get my money back for years.
      Thomas Henry is the person I would like to talk with.

      If anyone has his phone number or address of where he can be reached please contact me.

      All the buyers in the tradewinds project need to get
      together on this. Resort Quest is the broker that represented and conducted the sales. They must be held
      accountable as well.


  8. Just received letter from Thomas B. Henry’s attorney last week that he has been unable to secure capital to proceed with the TradeWinds Project. Therefore, down monies we all put down are gone. Is anyone aware of any good Florida lawyers who may be interested in a class action suit? Mr. Henry certainly has assets in all the projects he owns along 30A and the Tidewater condominiums.


  9. I would love to know more about any class action against Henry. As a purchaser at Tradewinds I received the same letter that the initial 10% of 20% deposits were used for construction purposes. Ha! What construction? The other 10% had already been refunded. To date I have seen nothing even though we had 20% cash down in escrow. Calls and emails to Gulf Coast Title and Henry’s attorney go unanswered or never returned after leaving msgs. Would love to know what assets he has left, if any in order to start a class action. Info anyone?


  10. Dec. 2010 Update
    We have retained a lawyer to contact other purchasers at Tradewinds to see if there is any interest in investigating the builder and this project. If your name is on the list, you should be receiving a letter in the near future.


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