Fannie, Freddie asked to relax condo loan rules: report
(Reuters) – 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: Quote, Profile, Research, Stock Buzz)(FNM.P: Quote, Profile, Research, Stock Buzz) 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: Quote, Profile, Research, Stock Buzz)(FRE.N: Quote, Profile, Research, Stock Buzz) 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.
The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos, the paper added.
In an interview with the paper, Weiner said the rules have “had a real chill on the ability to get these condos sold,” at a time when prices of condos have fallen enough to attract potential buyers.
In addition to the 70 percent sales threshold, 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, the paper added.
Both Fannie and Freddie are preparing a response to the lawmakers, according to the paper.
Fannie Mae and Freddie Mac could not be immediately reached for comment by Reuters.
(Reporting by Chakradhar Adusumilli in Bangalore; editing by Simon Jessop)