What the left hand giveth, the right hand taketh away…

After the good news that Fannie Mae will no longer treat vacant and foreclosed condos as non-owner occupied comes news of ever more underwriting restrictions.

January 15, 2009 is the cutoff date when Fannie Mae toughens its policies on condo properties in the Sunshine state – potentially putting a damper on investors fishing for foreclosures or short sales.

In a memo sent to lenders before in December, Fannie Mae said that deteriorating market conditions in Florida have forced it to require higher minimum downpayments and more extensive underwriting reviews before funding loans.

To protect itself from future losses, Fannie said it will require loan applications for units in new and existing condo projects in Florida to go through an intensive review process by in-house underwriting teams to evaluate the building, its finances and local market conditions.

Previously Fannie Mae allowed lenders to conduct their own expedited reviews. The new in-house reviews not only will take longer but also cost lenders money – perhaps as high as $15,000 for units in large projects, $3,000 or $30 a unit for projects with 100 units or less.

Lenders presumably will look to borrowers to pay the extra costs – and the additional time required for reviews could complicate some transactions.

Fannie Mae said it also wants higher equity up front from non-occupant investors and second home condo purchasers – a minimum 15 percent from investors and 10 percent from second home buyers. Investors will not be permitted to obtain mortgages at any downpayment amount in newly-constructed and recently-converted projects on or after January 15th - unless a full Fannie Mae project review has been completed.

Bottom line for investors here: If you’re serious about buying this year and you need a mortgage, you better nail it now. Or be prepared for a headache. Unless you’re a cash buyer of course. There’s no point waiting for a better deal if there’s no way you can get a loan on it anyway.

Contact Condo Metropolis asap for help with both financing and the best condo deals in town!