White gives agency an 'F' for implementation as lobbying continue
If there is anybody who can say they are an expert at condominium mortgage lending, it’s Kimber White.
The president of the National Association of Mortgage Brokers (NAMB) has built a storied career in Florida as a broker specializing in condo loans. He said more than 50% of his business is condo lending.
One of the issues White has been lobbying for, with others on Capitol Hill, is changes to Fannie Mae and Freddie Mac regulations regarding condo lending. The FHFA handed down changes, and they left White and others confused and frustrated.
White (pictured top) was appreciative of the effort to make changes and applauded some of the moves made by the FHFA. But he feels like some of the changes could wreck housing affordability, and called upon the agency to delay implementation or roll back the proposed changes.
“I give them a B-minus for efforts and an F for implementation,” White told Mortgage Professional America. “Are you in the field? Did you think this thing through? Have you really seen it? We’ve already got our plan. We're going to Congress, we're going to House Financial Services people, we're going to have conversations with Director Pulte and FHFA. I would like to know why you need to do this. In the very least, delay your implementation.
“It's going to make more lenders more skeptical. Lenders are going to be a little tougher on it, and they're going to be more conservative. This is absolutely a slap in the face for affordability in the United States.”
From limited to full review
There were several initiatives in the letter from the FHFA that NAMB and White were pleased with. Those included relaxation of property insurance requirements, removal of investor concentration restrictions, simplified standards for smaller projects, and project eligibility review service (PERS) flexibility at 50% pre-sale.
However, White believes the other changes undo the good changes that were made.
“As of August 1, they now have to go from a limited review to a full review,” White said. “Most condos throughout the United States are struggling to get the 10% reserves. The state of Florida, for example, was putting rules in place that they had to have the 10% reserves. And they realized that condo associations weren't even able to get there, so they kicked that can down the road until sometime in 2027. So condo associations are just now meeting the 10% reserve requirement.
“As of August 1, if you weren't meeting the 10% reserve requirement, you could do a limited review condo, meaning that you get 25% down on a primary residence, 30% on a second home and investment property. On primary, you could do a 75% first and a 15% second. So you could still reach your 90%, you can still get financing.”
With the move to a full review, White believes a lot of these condos won’t be eligible for financing with Fannie and Freddie.
“The full condo review is going to absolutely show that there are not 10% reserves, which automatically is going to throw all these condos out of being able to qualify,” he said. “On a limited review, there were no questions about occupancy, or about small things, or about minor litigation. All that wasn't there, and all that's now going to be in a full review. That is going to hurt us immediately.”
White said the problem gets worse on January 1, when the reserve requirements increase from 10% to 15%.
“It gets worse from October to January 1,” he said. “January 1, they move the goal posts to 15%, and you’ve only given someone eight months to figure that out. Lenders will start enforcing that in December because they have to deliver that in January. This doesn’t just affect Florida, but it affects the whole United States.
“I can tell you my condos, about 70% of those condos do not have the 10% reserves. And in Florida right now, you probably have about 80% do not have 10% reserves in the budget. So as of January 1, maybe 2% of condos have 15% reserves. It means you're going to have to increase reserves. You're going to have to do special assessments. You're going to hurt first-time homebuyers.”
Hoping for delays or rollback
Under these new changes, White believes that the value of condos is going to drop because it’s going to be harder to finance them and harder to sell them. It means only cash buyers will be able to pick them up, and even then, they may be reluctant to scoop them up.
“This is not helping affordability,” White said. “It's not helping the industry. I don't know who thought this was a good idea. Doesn't matter how much you give me because you just took out of the market 75% of the condos.”
The good news is that NAMB and others are already on Capitol Hill lobbying for the delayed implementation or rollback of this new policy.
“I came out of the gate first, because this is a very passionate issue to me,” White said. “We want them repealed. Go back to the limited review. But at the very least, delay the implementation. This doesn't work.”
Condos, in many areas, are the starter homes for first-time homebuyers. White said making them harder to finance is going to force more first-time buyers to either buy more expensive housing or remain in the rental market.
“That's the starter homes,” he said. “It's not Joe buying a huge investment. It's not John buying an investment second home. It's the first-time buyer who can afford to get in with three, five, 10% down and get into a starter. I'm not talking about $700,000 condos in Miami. I'm talking about there are Broward condos here for $225,000 that they can pay into. There are condos across the United States.
“That is a starter home for these people. That's how they move up. And we're taking affordability out of our industry and hurting those people who live there. Let's not forget about our seniors who might need financing, who need to refinance, or who are trying to sell their homes, and they're not going to be able to. It’s a real crisis.”
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