Florida is bursting with unsold condos, and a huge number are bank owned. So state legislation had to be crafted to help sell these vacant condos. Even Fannie Mae, Freddie Mac and FHA had to make special rules to help the state.
Distressed Condo Relief
One of these state legislative bills recently signed into law by Governor Charlie Crist is the Distressed Condominium Relief Act. This law was designed to encourage investors to buy condo units in bulk, and therefore help prevent the deterioration of condo buildings that have sprouted throughout Florida during the boom.
The new law, which will take effect in July this year, will also help condo associations survive when many of their units suffer foreclosures. They now have the right to collect rent from tenants of delinquent units as payment for association dues and they can now collect 12 months of back fees from lenders taking title to repossessed units, an increase from the previous 6-month assessment.
For investors planning to buy condos in bulk, the new law is a gift. It removes from them the burden of construction warranties, which add risks and costs to their investments. Previously, if an investor buys more than 7 units in a condo building with 70 units or more, he takes on the legal responsibilities of the original developer of the building, including repair costs.
Fannie Mae Special Approval
Another regulation that has been helping increase condo sales in Florida is the Special Approval program of Fannie Mae. Under Fannie rules, buyers cannot get Fannie Mae-backed loans if they buy condo units from buildings that are not approved by Fannie Mae. Condo developments are not approved by Fannie Mae if more than 15 percent of unit owners are not paying their monthly assessments or the condo association does not allot at least 10 percent of its budget on reserves and repairs.
Other factors are also considered by Fannie Mae, including decline in property values in the area and the percentage of building space allotted to commercial use.
Under the Special Approval scheme, Fannie Mae reviews again the status of condo buildings that did not meet standard eligibility criteria. If a condo project gets a Special Approval designation, buyers of units in this project will be able to obtain a Fannie Mae purchase or refinancing loan.Based on data from condo analysts, lenders now control a huge majority of unsold condos in Miami and other parts of South Florida, and that there are still around 40,000 pre-owned condos for resale in the region.
With the new state law and Fannie Mae regulations, it is hoped that condo sales will spike and put a rejuvenating spark into the Florida housing market.
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