by Michael H Wasserman
Tragedy in Sunrise, Florida and now Waukesha, Wisconsin.
Authorities ordered the emergency evacuation of another condominium building late last week. Deemed to be at risk of imminent collapse. Structural and life safety problems noted after a wind storm sheared some exterior elements off a couple of years ago. Led to a balcony reconstruction project, which in turn revealed far worse structural deterioration. Of a building (only) 50 years old. 80 or so people forced to leave their homes with no advance warning.
Fannie Mae’s October lender letter tightened lending guidelines in buildings with too much deferred maintenance. Inadequate reserves. Associations lacking the political will to take on the challenges of funding and orchestrating necessary structural and safety repairs.
Whether they are brought to light by municipal inspections or the associations own investigations or capital reserve studies. Fannie will not loan money into buildings with structural defects or deficiencies until they are made habitable. Not until the work is complete. And paid for.
Fannie Mae is calling on its lenders and their appraisers to ferret these buildings out. To shut off the money supply for loans into those associations. Once problems are identified, no acquisition loans. Not even loans already in the pipeline. No re-fi’s. Owners will be “stuck” with the inevitable special assessments and will have fewer avenues to raise funds by selling or pulling out home equity.
Brokers – how will this impact you in the coming year?
Are you going to invest time and resources into buildings that are dealing with deferred maintenance or pending capital improvement projects? Do you intend to pre-screen for problems before showing condo buildings to your prospective buyers? Will a building’s overall health deter you from taking a new listing?