FHA Relief For Some Condos

FHA Relief For Some Condos ORLANDO, FL - The resort-style pool, spa and health club along with luxurious 10-foot floor-to-ceiling windows are no longer the key selling points for 101 Eola in Thornton Park. Today the best thing going for the 146-unit condominium tower is that it's the only newly constructed building in downtown Orlando that is FHA approved, a special government sanction that allows buyers to put as little as 3.5 percent down.

Such a low down payment is virtually unheard of in today's condo market, where obtaining a loan can be nearly impossible, even when a buyer with good credit is able to put down 20 percent.

It's evidence of just how far the condo market has fallen since the boom days earlier this decade when towers began growing like kudzu on the city's skyline.

Today there is 19 months' worth of condo inventory in downtown Orlando, according to data from the Orlando Regional Realtors Association.

The locked-down lending environment has ground downtown condo transactions to a halt, forcing some properties such as The Paramount on Lake Eola and 55 West to focus on leasing rather than selling units.

A stamp of approval by the Federal Housing Administration should help lubricate the market for some buildings that can meet the strict requirements.

In the past month since 101 Eola became FHA approved and began advertising its new status — "FHA Financing Available!" shouts a banner on the top of its Web site — five new buyers have entered into contracts on units there.

"It opens the market," said John Page, sales manager at 101 Eola. "The biggest crisis in condos as a whole is that the deposit requirement is much greater than a single-family home."

The FHA insures lenders against defaults on loans made on units in approved buildings. That's an important safety feature for lenders because the secondary market for condo loans has disappeared, with the exception of government-backed mortgage companies Fannie Mae and Freddie Mac.

FHA approval for The Vue at Lake Eola is listed as "pending" in the U.S. Department of Housing and Urban Development database.

The FHA approval process requires, among other conditions, the developer to have sold at least 50 percent of the units, ensures that no more than 10 percent of the units can be owned by a single investor and no more than 15 percent of units can be past due on condo association fees.

Contrast those requirements with the reality in most buildings and it's easy to see why approval is hard to come by. Take Solaire at the Plaza, for example.

Cristian Michaels, the Solaire's sales and marketing director, said there is just one developer-owned unit left at Solaire, a studio priced at $99,000. (Similar units sold in the mid-$200,000s back in 2007.)

But about 17 percent of the owners at the Solaire are delinquent on their association fees, Michaels said. About 10 percent of that building is on the market, he said, with an estimated eight units in some stage of foreclosure or short sale.

As a result, he said, potential buyers are having trouble getting loans. The most recent transactions have been mostly cash, he said.

"You want stability in the project," said Scott Maxwell, president of the Mortgage Bankers Association of Florida. "You want soundness in people who are committed to pay the association dues. The agencies [Fannie Mae and Freddie Mac] have said, 'My gosh, we better make sure at the project level that there is soundness to it.'"

At SunTrust, where Maxwell is executive vice president overseeing the retail mortgage business in Florida, he said as far as non-FHA-approved buildings go, "we're just not making those kind of loans."
Source: OrlandoSentinel.com

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