New Rules for Co-ops and Condos New Fannie Mae Guidlines Warrant Attention

 In the last two years, Fannie Mae has amended it guidelines for selling and  serving mortgages on condominiums, cooperatives, and planned unit developments  three times. Why should service providers, cooperative corporations and community association  managers care about what the mortgage giant does?  

 Today, 70 percent of all mortgages are sold on the secondary market. Fannie Mae, and its sister, Freddie Mac, control roughly 90 percent of that  market. In short, if there are to be buyers of condominiums and co-ops, they need to be  able to satisfy Fannie Mae requirements. And without the ability to buy and  sell units freely, we can readily imagine the impact on property values. In  fact, we are seeing it already to a limited degree.  

 The History of Fannie Mae

 How did this come to be? Fannie Mae was created as part of the New Deal in the 1930s to purchase Federal  Housing Administration (FHA) loans. Banks had stopped lending for housing (sound familiar?) and this was a way to  bring low-cost money back into the market. Fannie Mae became a private company in 1968. Capital was raised to buy mortgages and resell them as mortgage-backed  securities.  

 This has traditionally been referred to as the secondary market. It exists to ensure a ready supply of mortgage capital to the market. Although some banks, and small savings and loans in particular, still retain  mortgages in their own portfolio, most mortgages are sold to the secondary  market.  

 Further, most loan originators would like to keep that option open—that is, to sell the mortgages in the future, even if they don’t do it now. That is why Fannie Mae underwriting guidelines have become the de facto standard  throughout the mortgage industry.  

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