True Gotham

What are the banks doing with all of our bailout money?  Getting fat and making the borrowing process miserable even for those with stellar credit, great jobs, and high liquidity.  

A current buyer of mine is supposed to be closing this coming Friday on a $1.7M condo in a new development project that is almost entirely sold.  She could pay cash for the property but decided to take out a small loan for some tax relief.  

Last week we found out that her lender, Wells Fargo is being hamstrung by Fannie Mae.  Fannie Mae is insisting on reviewing the condominium's operating budget which is not typically made available for review.  The building's financial statements which have been delivered to the lender show a healthy reserve fund in excess of $1.2M and an operating profit (many buildings run at a deficit).  Fannie has decided that unless the managing agent will supply a letter attesting that the operating profit will be transferred to the reserve fund, they will NOT fund the loan.  Here's what Wells Fargo must comply with according to Fannie Mae:

• Lenders must review the homeowners’ association budget (the actual budget for established projects or the projected budget for new projects) for all projects except two-unit to four-unit projects. This review must determine that the budget is adequate (i.e., it includes allocations for line items pertinent to the type of condominium), provides for the funding of replacement reserves for capital expenditures and deferred maintenance (at least 10 percent of the budget), and provides adequate funding for insurance deductible amounts. 

We are being told that no exception can be made to this policy therefore Wells Fargo is not permitted to fund this loan through Fannie Mae.  So a buyer putting more than $1M down on the purchase of a $1.7M home finds herself without a mortgage and possibly unable to close this week.  

I ask you this...If this buyer isn't approved for a loan, where is all of that TARP money?

My buyer wants some TARP!

Doug,

I am a Real Estate agent here. This sounds like one of my recent deals. Fannie Mae will issue 'a waiver' as long as the condo building will jump through the hoops and provide all the letters Fannie Mae asks for. My recent deal was with a condo unit that has 49% of sponsor concentration (rest are free market rental units), the sponsor showed more than $1.3M of yearly income on those free market rentals, but still was not good enough for Fannie Mae!!!
So the condo management had to provide more evidence to make Fannie Mae to feel better. We are now ready and clear to close!!! TOUGH TIMES!

I here you but managing agent will not comply with Fannie's requests. A bit of a p*ssing contest here and the loser is my buyer.

You also lose, your commission.

In this case the buyer will close eventually but the process has become absolutely ludicrous.

How about the seller of that property? Doesn't the seller want to sell? If so, they should pressure the managing agent to get the proper document for lender to issue the ok... Managing agent is just on a salary and of course they prefer to do as little as possible...

The seller is the a large institution who is hoping for a default so that they can keep contract deposit. Fortunately that won't happen but we're not getting ANY assistance from seller.

when did your buyer sign the contract?
For the past year I've advised all my buyer clients to not sign any contacts without financing contigency clause.

This buyer has the ability to pay all cash. Doesn't want to but can. It appears now that closing is going forward with a different mortgage product.

Just a head's up that we closed today on this property but it was done without financing and ALL CASH. As we were walking out of the closing room, the mortgage banker for Wells Fargo emailed to let us know that his second efforts for a different loan had just received approval and he was on his way to the closing.

So next week, the purchaser will close these loans to obtain financing although not the loan product that she was originally promised.

A lot of horror stories over the past few days about Wells Fargo so borrower beware. One managing agent even told me that they have sent letters to ALL of their property owners informing them that if they finance or refi with Wells they will NOT be at all guaranteed approval and likely declined due to Wells fargo's insane document requests.