​Standing Rock and How Completion Will Hurt Condo Loans

By: Stephanie Diana Wilson
Normally this blog is socially and politically neutral but; the topic of protecting water and environment is near and dear to me.  The topic of environment also has the possibility to hurt not only mine and much of the US economy’s bottom line and the future health and financial well fare of the children who will become future home buyers.  Lets for a moment forget about the financial facts that more money is there to be made and more jobs can be created by the use of green tech and alternative energy resources such as solar and wind.  Ignoring these facts but paying attention to the facts that oil spills, can cause water and soil contamination.  

The reason I bring this up is because all the major lending agencies have very strict guidelines regarding environmental hazards within land that condos and single family homes.  This blogs focus is in condo guidelines and it could cause a project to become unwarrantable.  As we have noted on numerous occasions always check with your mortgage advisor and underwriter with questions on specific properties.  However, if we look online at Fannie Mae’s underwriting guidelines (keep in mind that the guidelines change frequently and again check with your underwriter) environmental hazards can be researched in section B4-2.1-03, 04, and 05.  This can be seen on the Fannie Mae guidelines online at https://www.fanniemae.com/content/guide/selling/index.html.  

In the underwriting guidelines it details everything from legally acceptable amounts of radon and other soil contamination, water contamination and seismic issues.  However, even if a lender’s condo department does not catch these issues the news advertising an environmental hazard will drop appraisal values.  This was observed during the gas leak in Porter Ranch, California.  The LA times wrote an article in April about how the gas leak had dropped home values in that area.  The article can be seen online at http://www.latimes.com/business/realestate/la-fi-porter-ranch-sales-20160406-story.html.  Even before these Porter Ranch loans of any kind came to underwriting many lenders may have been cautious about doing loans there because of the underwriting issues that come with environmental hazards.  

Another example of environmental hazards hurting the real estate market is Flint Michigan.  Michigan was hit hard as a whole state after the financial crisis of 2008.  Now that the city has been without clean drinking water since 2014 the housing prices have dropped to around $14k!  CNN documented how the people in that community have been hurting with the financial crisis that the water contamination has caused.  Please see link to CNN’s article at http://money.cnn.com/2016/03/04/real_estate/flint-housing-water-crisis/.  Many residences cannot move because, they can’t sell their home to afford to move.  Which is causing a real estate crisis throughout the country as more pipelines are being pushed through despite a stop ordered by the US government.  

At Standing Rock which are trying to protect not just the land that the pipeline is being built which is actively used native burial grounds but; the river that supplies water to the local reservation. There the Water Protectors are protesting the possibility that a pipeline might rupture.  Unlike in Lycoming County Pennsylvania where they have recently had a pipeline burst.   NPR wrote an article when it happened https://stateimpact.npr.org/pennsylvania/2016/10/21/sunoco-gas-pipeline-ruptures-in-lycoming-county/.  Also we cannot forget how New Orleans and Texas suffered during the oil spills in 2010 and how it harmed their housing prices as well.  https://www.clearcapital.com/newsroom/press-releases/clear-capital-impact-of-bp-oil-spill-reaches-beyond-gulf-coast/.   

This comes as more pipelines are being built across the country and as reports come in not stopping in North Dakota even though the government has halted their approval of the project on the land.    Even though using the Bush concept of asking for forgiveness being easier than permission has been showing not to be the case.  Going against the wishes of the native people has cost the NDPL reps more money than expected and brought to light the issues they are causing around the country.  

Although the issue of property values dropping due to environmental hazards is being published and this is being done across disciplines.  Such as the US National Library of Medicine published an article on home prices that have been effected by plants being opened or closed near properties.  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4847734/. There is even an article on Jstor.org from the University of Wisconsin Press on how the building of pipelines has hurt property values.  https://www.jstor.org/stable/27647732?seq=1#page_scan_tab_contents. You can also find the same article at http://le.uwpress.org/content/82/4/529.short.  Some environmental hazards can be abated or monitored to fit within agency guidelines.  Such as the information detailed in one of my earlier blog posts on Meth being the new four letter word in mortgage.  Though in the case of an oil spill not only does it cause a issue with housing prices and value but for gas prices.  https://insideclimatenews.org/news/20131125/neighborhood-shattered-families-emptying-out-oil-hit-arkansas-town.  

With all the homes and condos all along the Mississippi the construction of pipelines throughout the country is becoming costly to the American People and the businesses that sponsor them.  The Department of Energy in the US has a website for people to find all the wonderful jobs in green energy including those in the labor and construction aspects of the industry.  Links to that info can be found at https://energy.gov/eere/education/clean-energy-jobs-and-career-planning.  

I get this is a highly political issue regarding treating and social economical discrimination and racial discrimination along with corporate and governmental corruption.  But, if all parties sit down and see how these actions are hurting both the American Dream of home ownership and the financial stability of the nation and its real estate industry which ends up hurting everyone’s pocket books change can be attained.  These companies investing in green energy instead of oil will increase their profits, put them in line with the rest of the world which is going or has already gone totally green.  It would also starve a potential national financial collapse by not polluting soil and ground water causing numerous homes property values to plummet.  This ability to plan ahead and adapt to an ever changing world is what made America great in the first place.  If we want to keep America great investments need to be shifted to account for geo political changes and environmental changes.   This will create jobs and raise the real estate values and the financial industry as a whole.  All parties need to look at this issue much like financial planning for a child while planning a will for ourselves.  We want to make sure we leave our kids with a sound financial footing and room for them to grow that way as well.  Our children and the economy cannot thrive if we have unrest and massive pollutants hindering financial and physical growth.   

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​Is Commission The Best Payment System for Loan Originators?

By: Stephanie Diana Gast- Wilson

So, to give some back story to the topic noted in the title.  I am taking an HR Human Behavior course within my Master’s program.  The term long case study we are examining is a company that used a Scanlon bonus pay plan to encourage morale long term and if this was shooting the company in the foot and if so what behavioral plan would you put in place to get the company back on track?  Of course my plan is to use six sigma cross training to not only develop appreciation at all levels for what each employee contributes but it empowers the employee by making them feel invested in and developing additional transferable skills should they be laid off.  Also allowing the company to be able to run lean with a skeleton crew if needed and find other cost saving strategies through entire company collaboration.  


However, when doing the research I found that studies since the 90’s show that bonus and commission pay plans are meant to be temporary quick morale boosters and tools for startups to keep costs down till the company can have a salary and hourly system put in place as they gain money.    According to an article in the Harvard Business Review there is a direct statistical link between quality falling and incentive plan pay systems.  You can find the article written by Alfie Kohn at  https://hbr.org/1993/09/why-incentive-plans-cannot-work.   Even the Society of Human Resource Management has an article from 2012 on the pitfalls the incentive pay plans have within the view point of HR and the employee/ work force behavior. The article can be found online at https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/incentivetips.aspx.
This got me thinking with all the issues that the mortgage industry has had and now the push for quality control and compliance focus why is the mortgage industry still paying sales people commission and no base?  I work with sales people all day long trying to help them navigate the underwriting guidelines with regard to condos.  

What many may or may not know Realtors, Loan Originators, Loan Officers, Account Executives, Account Managers, Sellers Agents, Brokers Mortgage Loan Officers, etc., are the sales force in mortgage and they are only paid based on a percentage of the loan that is being taken out.  Investopedia has a great article that details the way that sales people in this industry are paid. 

“Loan officers get paid in a way that they call “on the front” and/or “on the back.” If a loan officer makes money on the front, that means they are charging for things that you can see. This money is either out-of-pocket or is incorporated into the loan when you sign the papers. These are things like processing fees and other miscellaneous charges that are charged for processing your loan. If a loan officer makes money on the back that means money is being received from the bank as a sort of commission for filing the loan.”  

You can read more on this article at http://www.investopedia.com/articles/pf/lending-loan-officers-perspective.asp.  Also you can get more info on a similar article by Forbes.com at http://www.forbes.com/sites/learnvest/2013/07/17/secrets-of-a-mortgage-loan-officer/#681157e839c0.

So, since studies show that quality takes a hit when sales people are paid in an incentive based pay plan why do we keep using that same system in this industry?  Right now every lender in the country is looking for sales reps and coming up empty because of a number of reasons.  Some reason I hear from those I know who have left the industry include are numerous but the root is the pay scale and how the compliance focus has made the job even harder for sales people.  When really it is only harder because, the pay plan is set up for quantity over quality while demanding higher quality.  Which is absurd when you think about this issue with a global view within the Business Administrative and Operations Management scope.  
Another thing that many who do not work in the academic aspects of mortgage may or may not know is that the risk assessment model that the mortgage industry has been using until 2010 was the same one used since 1945. In the risk model developed for mortgage post World War II it viewed mortgage loans as a win, win for the lender.  The reason it was seen this way is if the borrower defaulted then the bank got the property back and could sell it off again. Which led to the development of lending products that created a potential for subprime issues.  However, as we all saw in 2008 that isn’t always a win, win in the event the whole company has a financial collapse.  There is a great working paper written by Robert Ban Order at the Stephen M. Ross School of Business at the University of Michigan which can be found at https://deepblue.lib.umich.edu/bitstream/handle/2027.42/55317/1086-VanOrder.pdf?sequence=1&isAllowed=y .  The scholarly article not only breaks down the history but also the math.  (Which again is why I feel mortgage should be pushed as a career path at the college level and looked at as a STEM field.)  We often forget about the detailed math and science that goes into developing the guidelines and risk analysis in mortgage.

Which brings me back to my original question should we still have a commission based payment system for sales people in mortgage?  We need to face facts sales people when paid in a commission/ incentive payment plans quantity becomes the game.  Cause if they don’t make sales they don’t eat.  If sales reps don’t make sales they can’t make the basic living needs.  And this payment plan sets sales reps up to fail.  

If the mortgage industry makes an overall change to provide a base pay to sales professionals the research suggests that the industry will stop feeling like they need more sales people to keep up with quota and people leaving the industry.  It will also promote quality which will lower the industry wide repurchase issues.  Furthermore the research shows that if the industry wide increase in quality starting with giving a base pay to sales reps then sales will increase.  Mostly because, sales reps will have a product that isn’t such a hard sell.  Sales people are the back bone of the mortgage industry but they are paid in a way that statistically sets them up to fail and have constant low morale.  That’s not fair nor is it logical from a business stance. When employees feel stable and empowered they perform miracles. 

This is theoretical though.  But, I welcome people to send messages on twitter and facebook.  Condo Land’s facebook page can be found under the name Condo Land Blog.  Send tweets to @sdgwwgds.  Also leaving comments on this page is helpful too.  Remember sharing is caring and if you found the info in this article informative and helpful.  

​Schrodinger’s Litigation

By: Stephanie Diana Wilson- Gast


A question that comes up to me often regarding structural defects cases is if the HOA has investigated structural defects and they are in the early stages of litigation but they aren’t officially in litigation.  Does this still count as a litigation review required?  

When asked this question it brings to mind the Big Bang Theory episode about Schrodinger’s cat.  https://www.youtube.com/watch?v=pNTMYNj2Ulk big bang theory episode

  This scenario is Schrodinger’s litigation.  Meaning it is both in litigation but yet not.  

For those not familiar with this theory Schrodinger’s Cat is a thought experiment where a scientist in my opinion was committing serious bouts of animal cruelty.  He put a cat in a box with a vial of poison and we don’t know if it opened or not.  So, thus until one investigates the box the cat is both alive and dead. Though the concept and experiment is deplorable to me and if I go further into why it bugs me I will just sound like the anti- Sheldon Cooper. 

Per usual my CYOB please contact your underwriter and real estate professional for case by case comparisons of your condo that you are investing in as each file differs.   

Now that legality is out of the way as a general example this Schrodinger’s Litigation this counts as litigation though the HOA hasn’t officially sued.  And yet it doesn’t still count as litigation.  But, most condo review specialists like myself are not attorneys.  So, it is not our jurisdiction to determine if the project’s litigation is dead or not in this generality.  

However, in this scenario the file has bigger issues that should be dealt with before it ever becomes a condo department issue.  Such as the underwriter will need to verify the structural defects are repaired and thus the property meets collateral requirements.  Fannie Mae and Freddie Mac both deem that litigations where there is an issue of habitability or safety structurally is not acceptable.  But, none the less that’s a question for the underwriter to ask well before it gets to a Condo Review Specialist’s desk.  

However, on the condo side of it there are some details regarding litigation files as a whole that need to be documented.  Such as again if the structural defect has been repaired and the HOA is just trying to get their money back from the developer for the repairs they had to make.  Which is logical cause if there is structural defect even in the common areas that is just more law suits sitting around waiting for a time and place to happen.  No HOA wants that risk.  Also since most of those litigations are monetary in nature FNMA requires proof the insurance is covering the costs of the defense and if the HOA loses, and how much is sought after and that the amount is covered by the insurance policy.   Also the appraisal needs to comment if the litigation will affect the marketability of the project.  

Again reach out to your underwriter or real estate professional as guideline update and change and each case is different from the last one.  And no one wants to be left hanging with a Schrodinger’s Litigation.  Both a do able deal and not do able deal. 


Hopefully this article helped you.  Remember sharing is caring.  Also if you have an idea of a topic on condos you would like to see researched shoot us a tweet at @sdgwwgds or email us. Comments below are also helpful too. 

Resume Fashion Tips

By: Stephanie Diana Wilson- Gast


Normally I stick to Condo specific topics but, recently I have been handed other people’s resumes and asked to take a look and there are a few topics that should be addressed.  Since I work in the Business arena and many of those who read my blog are as well the importance of a resume cannot be understated.  And in the academic arena of business not enough is really ever taught about writing and updating a resume.  So, I have developed some tips on updating your resume.  
Keep up with trends in resumes

Resumes are a lot like fashion things fall in and out of style.  A great example of things falling out of style is the Objective statement.  The muse has written a great article about how it is considered a faux Pas to put an objective statement in a resume. The articel can been seen on  https://www.themuse.com/advice/the-only-time-its-ok-to-use-an-objective-statement-on-your-resume  
However, much like the wearing of white after labor day it has been changed to fit in certain circumstances and changed to fit what is in trend now.  Welcome the new trending concept in resume writing called the Branding Statement.  US News’ Money section has an article on this topic that defines a branding statement as, “Your branding statement should be very brief. It’s not your job title, nor is it a list of your skills. It should provide a description of you, your attributes, the value that you provide to your employer, and things that differentiate you from your competition.”. So summarizing it is a lot like the intro statement on a twitter account.  Short, to the point and says a lot about you.   To Check out more on this topic check out the article noted above at http://money.usnews.com/money/blogs/outside-voices-careers/2013/01/15/resumes-101-swap-a-stale-objective-for-a-fresh-branding-statement.  
Another trend is the concept that a resume should only be one page and others feel that a resume should be as many pages as they can.  Monster.com has a great article on this specific topic and the fact the current trend is 2 pages.  One page a person tends to make the fonts so small to accommodate that no one can read it without a microscope.  But; it all depends on what type of job you are applying to.  I think my little sister who just graduated with her undergrad put it best when she asked similar questions about writing a resume my resume would look totally different from hers because, “That’s right you have a grown up career”.  Applying to jobs in the mortgage industry will look different than small company Office Management jobs.  So research is always in style there.  You can check out more on monster.com on this topic at http://www.monster.com/career-advice/article/how-to-decide-on-resume-length. 
Formatting
Formatting is really important.  We have all heard the studies about the few seconds a resume has to make an impression on an HR rep, Hiring Manager, Manager, or Recruiter but, the info on your resume can be all for nothing if the formatting looks like something whipped up in a high school study hall class on resume basics.  TG’s Adventures In Education has a great example of what I am talking about.  http://www.aie.org/find-a-job/write-your-resume/sample-resumes-and-templates/Resume-Template-High-School-Student-Academic.cfm
Now this doesn’t mean you need to go and do a “Legally Blonde” resume moment by putting your resume on colored paper or in any way drastically dressing it up.  Just go into your Microsoft Word program or if you are like me and love Chromebooks go to the Google Docs program and when creating a new doc select the resume formats that they have standard.  They are professional and add a level of professionalism that the above noted high school example leaves out.  

Also and this is really important to your own sanity save the work you have done as a word doc.  If you have a chromebook do it as both a google doc and a docx format.  However, also make an uneditable PDF version.   The gdoc/ docx, and doc format save helps so you don’t have to start from scratch every time you want to update your resume.  
The reason for an uneditable PDF is often we apply to jobs through craigslist or other sites and it is important to protect the information that you transfer.  An uneditable formatting will make it harder for people to copy or change info on your resume.  We can all never be too careful with our personal info.  
Don’t Show Your Age
One time when I was still new to mortgage I went into an interview and I didn’t think about putting the year I graduated high school and college.  When in the interview the company manager actually told me, “aww you are just a baby”.  Luckily I was raised to be quick witted and replied with, “I may be young but, I am highly educated, experienced, and dedicated”.  That usually shuts things down right away that and when they comment on how young I look patting my hair and saying, “Yeah in my family on my mother’s side we age really well” and saying “I am blessed to look younger than my years and experience prove to be”.  But; this all proves an important point before an interview is lined up thing like that allude to age.  And where age discrimination is illegal who is to say that isn’t happening when someone reviews a resume.  
Another fatal flaw in the age topic is if you put too much experience on your resume or list how many years of experience you have in a summary or branding statement.  Monster has a great article on this topic at http://www.monster.com/career-advice/article/5-things-you-should-never-put-on-your-resume.  
An actual life example is one of my friends gave me her husband’s resume to edit which was a five page resume showing his 30 years in manufacturing.  By cutting down to the most recent experience within the last 10 years it made his resume 2 pages and gave him a digital face lift.  The long and the short of it is most employers don’t want to know what you did at the very start of your career most job fields have changed so drastically that what you did even ten years ago as is asked on most standard applications may be outdated and unhelpful.  So, rule of thumb keep it current and keep it on point.  Sleek and fashionable like a timeless little black dress.  
Social Media

Social media is an important tool in both hunting for jobs and creating a resume.  Many companies and application sites are requiring you to log in and apply with linkedIn so having a LinkedIn account can make or break your job search.  Much like with a resume some things you need to leave on the private setting on facebook and other things you can post on LinkedIn which is more or less facebook for careers for those who don’t know.  
So, putting your twitter handle or your link to facebook should be done with causion.  Much like the reason for uneditable PDF format resumes the internet is a scary place filled with people who want to be you.  So, protecting your ID is vital.  Also we all put things we will joke about with friends and family on facebook that we wouldn’t want to account or comment on with coworkers.  Or at least we wouldn’t want to comment on these posts with co workers for fear of making HR reps twitch with the disturbance in the force.  
This same principle goes for using LinkedIn or Twitter for Business don’t put anything that you wouldn’t converse with coworkers about.  Articles you write or any scholarly publication, artistic publication.  If you can’t talk about it around the water cooler without fearing for your job then don’t even add it to the publications section of LinkedIn (where I will post links to this article in mine [shameless plug done]). 
Have A Portfolio Ready

Now this again is determined based on what type of job you are applying to but; many times an employer wants to see examples of your business writing, or materials you have contributed to help with the furthering of your department.  So, always draw up materials separate on your own time that do not contain proprietary info and keep it as a portfolio.  Also starting a blog on your career field and keeping some of those published articles also can be helpful.  It all depends on the job and company applying to.  And if you put a lot of research into your writing.  If there is no research or teeth to your writing it will be a resume fashion accessory victim as Joan Rivers would have equivocate it.  

References Provided Upon Request… duh?

Seriously don’t put “references provided upon request” at the bottom of your resume.  It kind of makes those reviewing the resume make Homer Simpson like sounds because of course when they ask you will have to provide references.  That’s the whole point in the background check.  Regardless of applying for school or work you need to have people vouch for you.  Putting this quote anywhere on your resume is like a man wearing high heel shoes for fashion reasons.  It was acceptable in the 18th century but; now in the 21st century not so much.  Now it kind of looks like a Napoleon Complex issue.
To Address or Not To Address That Is The Question?

I learned quickly in college putting your address or even just city and state on a resume is a gamble.  Like we mentioned about applying to jobs online putting address info can be risky although most business communications courses still teach you to do it.  Amanda Augustine at the Ladders wrote an awesome article on this topic as well.  You can catch it online at https://www.theladders.com/career-advice/things-you-should-never-put-on-your-resume/.  

I had applied to a job while in my Senior year of college for an Onsite Resident Manager position for a small property management company.  And I made the fools mistake of putting my address on my resume as that was what I was taught in school.  A week later some strange man showed up at my door from the company saying he was doing an impromptu interview at my home because, he wanted to see if I keep my home well and thus would keep the unit they would be providing equally well.  My well kept apartment helped him decide to hire me.  However, I turned him down because that was super creepy and I adopted a dog shortly after.  You can never be too careful.  

To sum up this has been seven tips for writing a resume.  We all need to protect ourselves and our data along with making sure we stand out from the crowd and look professional while doing so.  You have a short amount of time to make that first impression with your resume and those moments can’t be undone.  So, keep your resume current, on point, and fashionable.  
If this article helped you remember sharing is caring.  Also follow me on twitter at @sdgwwgds and subscribe to this blog Condo Land.  

Sharks and Real Estate

By Stephanie Diana Wilson- Gast

 

Personally I have always loved “Shark Week”, on the discovery channel.  They are beautiful and misunderstood creatures.  Being a native Californian and living most of my life in the San Francisco bay area sharks are a relatively common concern.  As a child I loved the Shark exhibit at the Monterey Bay Aquarium and the display of adolescent aged Great White Shark teeth from a shark caught off the coast of Santa Cruz.  Or when they have an exhibit on the Great Whites they used to catch from the wild to study.  There is a great article on this breed of shark on the Monterey Bay Aquarium site at https://www.montereybayaquarium.org/animal-guide/fishes/white-shark.  Oh and the Shark Experience at Vallejo’s 6 flags Marine World https://www.sixflags.com/discoverykingdom/attractions/shark-experience is fun for all ages.  And it is a relativley common sight to see Sharks eating seals in San Francisco, http://abc7news.com/news/cluster-of-20-great-white-sharks-spotted-near-pacifica/1050614/.  We even have Killer Whales that have been recorded attacking and killing great whites in the San Francisco Bay.  https://www.youtube.com/watch?v=a7MCq4gkbm4.  In Southern California locals are used to news and weather reports that include shark warnings.  

killer-whale-vs-great-white-shark

You may be reading about my love of local Sharks (which includes the San Jose Sharks hockey team), and wondering what does any of this have to do with Condos and real Estate?  Well, California is always in a boom for housing and the state is its own Condo Land.  So, is Hawaii which is a popular place to buy condos as well if only for a second home.  

Both Hawaii and California are known for their sharks and shark attacks which does not deter home or Condo sales.  However, with Florida finally starting to come out of the real estate slump it has been in since the 2008 financial crash and the news regarding Florida revolving around the recent gator attack, an enormous gator on a golf course and the recent shooting in Orlando.  (Our Hearts are with those mourning loved ones in Orlando). I have to say honestly it is a common to get an appraisal that has a gator on the patio and a note saying there were no pictures on the patio because of a gator. What we don’t hear about is the fact that Florida is home to the most amount of sharks in the country.  

This includes Bull Sharks which live in fresh and salt water.  http://www.sun-sentinel.com/local/palm-beach/fl-riviera-beach-sailfish-marina-shark-attack-20160413-story.html.  Bull Sharks are known for being extremely violent.

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The National Geographic website posted a map on http://news.nationalgeographic.com/2015/07/shark-attacks-in-the-us/ showing that the most shark attacks happen on the South East Coast and Gulf of Mexico which both waters boarder Florida.  

sharks800

Also currently in the news in Texas off the Gulf Coast they are suffering from a Flesh eating bacteria that is being found in their sea water.  http://www.chron.com/news/houston-texas/article/Report-Another-man-gets-infected-from-8325546.php   And although Shark attacks are not as common in Texas they are home to Great Whites.  I guess everything’s bigger in Texas.  
I could get onto a soap box and note that over fishing and pollution are driving these once thought to be deep sea sharks.  Though I believe there is a way to fix the environment to help these creatures go back to their natural habitats and not be on our beaches so much that America has a rich tradition of Shark Attack movies.  However, that is a conversation for another day.  Today being the first day of Shark week I encourage everyone to learn about these wonderful creatures and respect that when we buy homes on the beach we are paying to look out into their homes.  Respect should be given to these creatures and caution to those who live near them.  

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Environmental Hazards and Condos

By: Stephanie Diana Wilson- Gast

As many of us are aware there has been well published issues with environmental hazards going on within the country.  Most notably recently on national news has been found in Flint Michigan and Porter Ranch in California.   This being said it seems like the best time to discuss the FNMA Environmental Hazards guidelines.
First let us get the CYOB aspects out of the way.  We are only noting based on publicized documentation from FNMA. You may find these guidelines online at https://www.fanniemae.com/content/guide/sel121515.pdf .  If you have questions please reach out to your underwriter or real estate professional. 
Now that we have gotten this out of the way as noted above this information is pulled from the FNMA seller guide dated 12/15/15 which is the most current guideline at the time of writing this article.  The section for this information can be found in section B4-2.1-03 through section B4-2.1- 05. 
Section B4-2.1-03 starts out with the types of Environmental hazard assessments.  In this case there are 2 phases of this section.  Phase I is done by the lender or someone employed by the lender where information is obtained from various sources to evaluate the environmental soundness of the project as a whole.  One comment I get a lot is, “the environmental issue is not in the building the subject unit is located in”.  To them I have to point out that this is nice but in Condo review we don’t care about the individual unit but rather the project as a whole.  These sort of issues in a project are a form of collateral issue within the project as a whole which is why FNMA has these items reviewed.
In phase II of this section these reviews are done by an environmental consultant.  This being said phase I must be done and problems with the project must be identified.  Then it needs to be determined if the issue is inconclusive or not?  Also please see FNMA’s guideline in this section on acceptability of consultants. Where FNMA doesn’t currently have a format for consultant’s report they do want the following items addressed.
include a full description of the sampling procedures
include the laboratory results
include the consultant’s recommendations
follow all regulatory standards and good management practices at all times,
especially when physical sampling and laboratory analysis are involved
include the signature of an officer of the consulting firm that conducted the work
include a certification in the report that:
the assessment was performed diligently and in accordance with all regulatory and good management standards; and
to the best of the consultant’s knowledge, the results are complete and accurate
Section B4-2.1-04 goes into Unacceptable Environmental conditions.  Please see the list and the limits of concentration on page 682 of this guideline.  Section B4-2.1-05 covers remedial actions and it details that remediation can be done under the advice of a qualified environmental consultant.  But, all remedial actions must be taken in accordance with all regulatory and good management standards.  However, this section notes the following:
“The following conditions:
•A qualified environmental consultant states in writing that remedial work needed to make the property eligible under the environmental standards can be completed within 90 days.
The project’s developer or sponsor signs a contract with a qualified firm to perform the remedial work within 90 days.
The lender must warrant that the job has been satisfactorily completed and the property meets Fannie Mae’s environmental eligibility standards.
The project developer or sponsor must provide a performance escrow equal to 150% of the gross contract amount to ensure the completion of the remedial work.”

Hopefully this article will help shed more light on environmental issues in condo projects.  If this article helped with your research please like us on facebook and twitter.  Also remember sharing is caring.

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Rumors of Spot Approvals

By: Stephanie Diana Wilson-Gast

For those who don’t know what a Spot Approval is, within the condo jargon term that is no longer in use.   It means to have a condo unit approved or to approve the unit and not the whole complex.  Now FNMA, FLHMC, FHA, AND VA do not do Spot Approvals.  They were done prior to the crash of 2008 with dire consequences to the lender and borrower.

 

See lenders require approving the whole project. Even in the limited review process information is obtained for the entire project not just the subject unit.  One thing I hear a lot about is not matter what kind of litigation, budget issue, ect it doesn’t effect the subject unit.  Which is not the case.  

 

In projects where there are issues with the HOA legally,  financially, physically,  ect, that’s not a good investment for borrowers or investors.   On the underwriting side this creates what is called a collateral issue.  Reviewing the whole project not just the subject unit not only makes a less risky loan but, makes less issues for both lender and borrower later down the line.  

 

Reviewing the whole project also when you think globally helps the economy indirectly as well.  See as condos become more and more prevalent they become a safer investment for borrowers.  Where condos are risky for lenders as it isn’t as simple as underwriting a loan for a single family residents where there’s just one unit to deal with but 2- 2000 units.  This makes the risk of something not being maintained causing issues for all the 2-2000 units.   But with a review of the whole project it lowers the risk for both parties.   

 

There have apparently been rumors that Spot Approvals are now being brought back like an old TV show.  Based on research this is false.  Spot Approvals have gone the way of the dodo.  You don’t see movies about resurrecting them.  Nor will you like see any major lending agency like FNMA, FLHMC, FHA or VA bringing these types of Approvals back. Which is safest for all involved.

 

“Commonly Asked Condo Questions”

By: Stephanie Diana Wilson- Gast

So, in my position throughout my day I end up quoting the FNMA seller guide. Many others in the Condo Project Review field have also noted that they repeat the same guidelines as they are commonly asked questions. This gave me the bright idea to make a list of commonly asked questions and the quotes from the FNMA seller guide as a method of helping underwriters, and investors navigate the condo mortgage world.

Now for the CYOB (Cover Your Own Bottom) portion of this post. These quotes are from the FNMA seller guide updated 11/03/15 found on FNMA’s underwriting website at https://www.fanniemae.com/content/guide/selling/index.html. These are not my expressed opinions and for further information on these topics please consult your underwriter or mortgage professional. The pages are referenced at the bottom of each quote to assist in locating the direct quote. Also please note that FNMA updates their guidelines monthly and these quotes are subject to change based on FNMA’s updates. These quotes only reflect quotes from the guideline that was current at time of this post which was dated 11/03/15.

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Commonly Asked Topics and FNMA Quotes

FNMA Seller Guide Updated 11/3/15

Quote

Topic

Lenders must review the HOA projected budget to determine that it is adequate (i.e., it includes allocations for line items pertinent to the type of condo project), and provides for the funding of replacement reserves for capital expenditures and deferred maintenance that is at least 10% of the budget….The lender may use a reserve study in lieu of calculating the replacement reserve of 10% provided the following conditions are met: the lender obtains a copy of an acceptable reserve study and retains the study and the lender’s analysis of the study in the project approval file, the study demonstrates that the project has adequate funded reserves that provide

financial protection for the project equivalent to Fannie Mae’s standard reserve

requirements,

• the study demonstrates that the project’s funded reserves meet or exceed the

recommendations included in the reserve study, and

Budget

• the study meets Fannie Mae’s requirements for replacement reserve studies listed

at the end of this section.

Note: These requirements for a budget review, replacement reserves, and

reserve study are not applicable to two- to four-unit projects. (Page 688 FNMA seller guide updated 11/3/15)”.

The lender may use a reserve study in lieu of calculating the replacement reserve of

10% provided the following conditions are met:

• the lender obtains a copy of an acceptable reserve study and retains the study and

the lender’s analysis of the study in the project approval file,

• the study demonstrates that the project has adequate funded reserves that provide

financial protection for the project equivalent to Fannie Mae’s standard reserve

requirements,

• the study demonstrates that the project’s funded reserves meet or exceed the

recommendations included in the reserve study, and

• the study meets Fannie Mae’s requirements for replacement reserve studies listed

at the end of this section.

Note: These requirements for a budget review, replacement reserves, and

Reserve study are not applicable to two- to four-unit projects. (Page 689 FNMA seller guide updated 11/3/15)

Reserve Study

Individual condo units:

Stand-alone flood insurance dwelling policies for an attached individual condo unit are not acceptable. A master condo flood insurance policy must be maintained by the HOA, subject to the coverage requirements below. (For detached units, refer to the requirements described in Coverage for First Mortgages above.)

Condo projects:

Flood Insurance

The HOA must obtain a Residential Condominium Building Association Policy or equivalent private flood insurance coverage for each building that is located in an SFHA. The policy must cover all of the common elements and property (including machinery and equipment that are part of the building), as well as each of the individual units in the building.

The master flood insurance policy must be at least equal to the lower of

80% of the replacement cost, or

the maximum insurance available from NFIP per unit (which is currently $250,000).

If the condo project master policy meets the minimum coverage requirements above but does not meet the one- to four-unit coverage requirements (described in Coverage for First Mortgages), a supplemental policy may be maintained by the unit owner for the difference.

The contents coverage should equal 100% of the insurable value of all contents (including machinery and equipment that are not part of the building), owned in common by association members.

If the condo project has no master flood insurance policy or if the master flood insurance policy does not meet the requirements above, mortgages securing units in that project are not eligible for delivery to Fannie Mae.

Note: DU Refi Plus and Refi Plus loans secured by units in a condo project are not required to meet the flood insurance requirements for master flood insurance policies stated in this section. Rather, if no master policy is in place, a stand-alone dwelling policy may be maintained by the unit owner to meet the full one- to four-unit requirements. If the master policy is deficient

(by any amount), a supplemental policy may be maintained by the unit owner for the difference between the master policy and the one- to four-unit requirements. (FNMA seller guide 11/03/15 Page 963)

Boiler and Machinery/Equipment Breakdown Endorsement, if the project has central heating or cooling. This endorsement should provide for the insurer’s minimum liability per accidentto at least equal the lesser of $2 million or the insurable value of the building(s) housing the

boiler or machinery. In lieu of obtaining this as an endorsement to the commercial package

policy, the project may purchase separate standalone boiler and machinery coverage. (FNMA seller guide updated 11/03/15 page 952).

Boiler

Policies with Coinsurance

Policies with coinsurance provisions can create additional risk for an HOA in the event of a loss

if the amount of insurance coverage is less than the full insurable value. Master property policies

that provide coverage at 100% of the insurable replacement cost of the project improvements,

including the individual units, alleviate the risk of a coinsurance penalty being applied in the

event of a loss.

If the policy has a coinsurance clause, inclusion of an Agreed Amount Endorsement or selection

of the Agreed Value Option (which waives the requirement for coinsurance) is considered

acceptable evidence that the 100% insurable replacement cost requirement has been met. If an

Agreed Amount/Agreed Value provision is used, the Agreed Amount must be no less than the

estimated replacement cost.

If the policy includes a coinsurance clause, but the coinsurance provision is not waived, the

Coinsurance

policy is still eligible if evidence acceptable to the lender confirms that the amount of coverage

is at least equal to 100% of the insurable replacement cost of the project improvements. This

evidence (documentation) must be maintained by the lender. (FNMA Seller Guide updated 11/03/15 page 951).

“Bare Walls” policy: This policy typically provides no coverage for the unit interior, which

includes fixtures, equipment, and replacement of interior improvements and betterments.

As a result, the borrower must obtain an individual HO-6 policy that provides coverage

sufficient to repair the condo unit to its condition prior to a loss claim event, as determined

by the insurer. (FNMA Seller Guide updated 11/03/15 page 950)

HO-6/ Walls in

As seen in the Ineligible Project Characteristics: Projects in which a single entity (the same individual,

investor group, partnership, or corporation) owns

more than the following total number of units in the

project:

• projects with 2 to 4 units – 1 unit

• projects with 5 to 20 units – 2 units

• projects with 21 or more units – 10%

Units currently subject to any lease arrangement must

be included in the calculation. This includes lease

arrangements containing provisions for the future

purchase of the units such as lease-purchase and

lease-to-own arrangements.

Units are not included in the calculation if they are

owned by the project sponsor or developer and are

Single Entity Ownership

vacant and being actively marketed for sale. (FNMA seller guide updated 11/03/15 page 666).

Fannie Mae requires that no more than 25% of a condo or co-op project or 25% of the building

in which the project is located be commercial space or allocated to mixed-use. This includes

commercial space that is above and below grade.

Any commercial space in the project or in the building in which the residential project is located

must be compatible with the overall residential nature of the project.

Note: Rental apartments and hotels located within the project must be classified as

commercial space even though these may be considered “residential” in nature.

Calculation of Commercial Space. Commercial space allocation is calculated by dividing the

total non-residential square footage by the total square footage of the project or building. Lenders

are responsible for determining the total square footage of the project, the square footage of

the non-residential space, and the residential space square footage. This calculation includes

the total square footage of commercial space even if the residential and commercial owners are

represented by separate associations. (FNMA seller guide updated 11/03/15 page 672)

Commercial Space

As seen in the Ineligible Project Characteristics: Projects with mandatory upfront or periodic

membership fees for the use of recreational amenities,

such as country club facilities and golf courses,

owned by an outside party (including the developer

Country Clubs with mandatory fees

or builder). Membership fees paid for the use of

recreational amenities owned exclusively by the HOA

or master association are acceptable. (FNMA seller guide updated 11/03/15 Page 665).

Projects that Operate as Hotels or Motels

Projects with one or more of the following characteristics may be operating as a hotel or motel

and are therefore ineligible:

• hotel or motel conversions (or conversions of other similar transient properties), unless the

project is an established project, meets all requirements for gut rehabilitation projects, and all

units are residential dwelling units;

• projects that include registration services and offer rentals of units on a daily basis;

• projects that restrict the owner’s ability to occupy the unit; and

• projects with mandatory rental pooling agreements that require unit owners to either rent their

units or give a management firm control over the occupancy of the units.

– These formal agreements between the developer, homeowners’ association, and/or the

individual unit owners, obligate the unit owner to rent the property on a seasonal, monthly,

weekly, or daily basis. In many cases, the agreements include blackout dates, continuous

occupancy limitations, and other such use restrictions. In return, the unit owner receives a

share of the revenue generated from the rental of the unit. (FNMA seller guide updated 11/03/15 page 668).

Condo Hotel

Projects that Operate as a Continuing Care Community or Facility

Mortgages secured by units in a project that operates, either wholly or partially, as a continuing

Continuing Care

care community are ineligible for delivery to Fannie Mae. These communities or facilities are

residential projects designed to meet specialized health and housing needs and typically require

residents to enter into a lifetime contract with the facility to meet all future health, housing, or

care needs. These communities may also be known by other names such as life-care facilities.

Projects that make continuing care services available to residents are eligible only if the

continuing care facilities or services are not owned or operated by the HOA and residential unit

owners are not obligated to purchase or utilize the services through a mandatory membership,

contract, or other arrangement. (FNMA seller guide updated 11/03/15 page 671)

Live-Work Projects

Live-work projects are projects that permit individual residential unit owners to operate and run

a small business from their residential unit. Units in projects that permit live-work arrangements

are eligible for sale to Fannie Mae provided the following additional requirements are met:

• The overall character of the project is residential.

• Live-work units must be limited to residential units that are occupied as primary residences in

which the unit owner is the owner and operator of the small business. The live-work unit must be primarily residential in character with minimal space designated to

or modifications made to accommodate the unit owner’s commercial activity.

• The commercial use must be consistent with the residential nature of the project.

• The project documents must permit

Live Work

commercial use and state what types of commercial use

are acceptable.

• The project must conform to any applicable local ordinances governing the structure and

operation of live-work projects including limitations on the number of live-work units or the

percentage of live-work unit space permitted.

The lender must confirm that the live-work component of the project is considered and

adequately addressed in the appraiser’s assessment of the property. All of the following

requirements must be met:

• The appraisal must include an adequate description of the live-work characteristics of the

project and the unit.

• The market value of the unit is primarily a function of its residential characteristics, rather than

of the business use or any special business-use modifications that were made.

• The future marketability of the unit will not be negatively impacted by the business use or any

special business-use modifications that have been made. (FNMA seller guide updated 11/03/15 Page 674)

which the project sponsor or developer is named as a party to pending litigation that relates to the

safety, structural soundness, habitability, or functional use of the project are ineligible for sale to

Fannie Mae.

If the lender determines that pending litigation involves minor matters with no impact on the

safety, structural soundness, habitability, or functional use of the project, the project is eligible

provided the litigation is limited to one of the following categories:

• non-monetary litigation involving neighbor

Litigation

disputes or rights of quiet enjoyment;

• litigation for which the claimed amount is known, the insurance carrier has agreed to provide

the defense, and the amount is covered by the HOA’s or co-op corporation’s insurance; or

• the HOA or co-op is named as the plaintiff in a foreclosure action, or as a plaintiff in an action

for past due HOA assessments. (FNMA seller guide updated 11/03/15 page 676)

No more than 15% of the total units in a project may be 60 days or more past due

on their common expense assessments (also known as HOA dues). For example,

a 100–unit project may not have more than 15 units that are 60 days or more past

due.

Note: In a two- to four-unit project, no unit owners may be 60 or more days

past due on their HOA common expense assessments.

This ratio is calculated by dividing the number of units with common expense

assessments that are past due by 60 or more days by the total number of units in the

project. (FNMA seller guide updated 11/03/15 page 688)

Delinquency

For investment property transactions on attached units in established projects

(including two- to four-unit projects), at least 50% of the total units in the project

must be conveyed to principal residence or second home purchasers. This

requirement does not apply if the subject mortgage is for a principal residence or

second home. (FNMA seller guide updated 11/03/15 page 691)

Investment

For newly converted two- to four-unit non-gut rehabilitation projects, the following

requirements apply:

• All rehabilitation work involved in a condo conversion must have been

completed in a professional manner.

2-4 unit new conversion / non gut 2-4

• A current reserve study prepared by a qualified, independent professional

company, accompanied by an engineer’s report, or functional equivalent, must

comment favorably on the structural integrity of the project and the remaining

useful life of the major project components.

• The project budget must contain line items for the following:

– reserves that adequately support the costs identified in the reserve study, even

if the study recommends budgeting reserves greater than 10% of the project’s

income;

– funds to cover the total cost of any items identified in the reserve study or

engineer’s report that need to be replaced within 5 years from the date of

the study must be deposited in the HOA’s reserve account, in addition to the

amount stated immediately above; and

– a utility contingency of at least 10% of the previous year’s utility costs if the

utilities are not separately metered.

Note: Newly converted gut rehabilitation projects must follow the standard

gut rehabilitation requirements listed under the eligibility requirements

above. (FNMA seller guide updated 11/03/15 page 692).

The project, or the subject legal phase, must be “substantially complete” unless

other completion arrangements have been approved by Fannie Mae through the

PERS review process.

There may not be more than one legal phase per building.

“Substantially complete” means that

• a certificate of occupancy or other substantially similar document has been

issued by the applicable governmental agency for the project or subject phase;

and

• all the units and buildings in the legal phase in which the unit securing the

New Construction/ Occupancy cert

mortgage is located are complete, subject to the installation of buyer selection

items, such as appliances.

Note: Fannie Mae does not require the installation of typical buyer selection

items such as appliances, floor coverings, counter tops, or light fixtures that

are common and customary for the market, although buyer selections that

involve the modification of a unit floor plan must be complete. Lenders

are expected to obtain appropriate documentation to verify that all buyer

selection items for the unit being financed are properly installed prior to

closing.

Two- to four-unit projects: All units, common elements, and facilities within the

project must be 100% complete and not subject to additional phasing even when the

project is a new or newly converted project. (FNMA seller guide updated 11/03/15 page 695)

At least 50% of the total units in the project or subject legal phase must have been

conveyed or be under contract for sale to principal residence or second home

purchasers. (FNMA seller guide updated 11/03/15 page 695)

New construction pre-sale

Two- to four-unit projects: All but one unit in the project must have been

conveyed or be under contract for sale to a principal residence or second home

purchaser. Individual units in new condo projects must be available for immediate occupancy

at the time of loan closing. (FNMA seller guidelines updated 11/03/15 page 696)

2-4 new construction

• Limited Review, or

• Fannie Mae Review through the streamlined

PERS process (for established condo projects)

Note: There are no LTV ratio or

occupancy restrictions for Limited Review

Detached condo unit in a new or established

project,

including a detached unit in a condo project

that includes a mixture of attached and

detached units

eligibility for detached condo units. (FNMA seller guideline updated 11/03/15 page 658)

A project for which all of the following are true:

• at least 90% of the total units in the project have been conveyed

to the unit purchasers;

• the project is 100% complete, including all units and common

elements;

• the project is not subject to additional phasing or annexation; and

• control of the HOA has been turned over to the unit owners. (FNMA seller guide updated 11/03/15 page 656)

Established Condo Project defined

A project for which one or more of the following is true: fewer than 90% of the total units in the project have been

conveyed to the unit purchasers;

• the project is not fully completed, such as proposed construction,

new construction, or the proposed or incomplete conversion of an

existing building to a condo;

• the project is newly converted; or

• the project is subject to additional phasing or annexation. (FNMA seller guide updated 11/03/15 page 657)

New Construction Project defined

The project is not an ineligible project.

The project does not consist of manufactured homes.

If the subject unit is a detached unit, the unit securing the mortgage must be 100%

complete.

The appraisal of the subject unit meets all applicable appraisal requirements, as

stated in Chapter B4-1, Appraisal Requirements.

The appraisal of the subject unit meets all applicable appraisal requirements, as

stated in Chapter B4-1, Appraisal Requirements.

The unit securing the mortgage satisfies all

Limited Review Eligibility Requirements

insurance requirements as stated in

Subpart B7, Insurance, including all provision applicable to condo projects in

Chapter B7–4, Additional Project Insurance. (FNMA seller guide updated 11/03/15 page 685)

Learn To Love the Condo

By Stephanie Diana Wilson- Gast

So, I thought I would shake things up with the topic of condos and do more of an opinion post.  Across the industry even with friends in the industry at other companies say how much they don’t like condos as a product to sell or underwrite.  Even strangers in the industry wince at me when I explain what my job title is and what I do. Honestly it makes me feel like a dentist in the fact people look at you like you must be crazy to be in that field but they want to know a bit more and may open their mouth wanting you to take a peek.
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Although to those who say they “Don’t like”, or “hate” condos I say to them…”Learn to love the condo”.  The reason for this is Condos are not going anywhere.  In fact with the housing crisis we have been seeing in California, Colorado, and Washington Condos are becoming more and more prevalent.  Even during the economic crisis the SF Gate noted how Condo sales were starting to pick up in the San Francisco bay area market.  http://www.sfgate.com/realestate/article/Condo-sales-picking-up-in-Bay-Area-4207185.php.   The Daily News New York notes the increase in condos being built especially for affordable housing purchases. http://www.nydailynews.com/life-style/real-estate/wave-new-new-york-city-condos-ranges-affordable-astronomical-article-1.1936804

As Condos grow in popularity among home buyers everyone across the board should learn to love the condo.  Not only in the long run if one learns how to review or at least what documents to get for a lenders condo team and what FNMA and Freddie Mac require condos become easier to love.  Especially since in November of 2014 FNMA over hauled their guidelines making the guidelines more flexible for lenders to lend in condos. Litigation, condo hotel and mismanaged project are still something to watch out for but, they are better defined now and with the help of the internet easier to sniff out.

Using the San Francisco bay area as an example Paragon Real Estate group puts the median housing price in San Francisco as $600,000- $6,500,000.  http://www.paragon-re.com/What_Costs_How_Much_Where_in_the_Bay_Area .  Trulia’s website even confirms this as well http://www.trulia.com/real_estate/San_Francisco-California/market-trends/ with math mathematical trends.  Even naming the most popular neighborhoods. Here in Marin County a 2-3 bedroom Condo is going for $350k to $600k where a falling apart single family home or to those of us in the industry an “SFR” is going for $800k- $1 million.  Even people in Silicon Valley markets are feeling a similar price range as well.  And for a borrower a condo is a good investment if only for less stress regarding the outward upkeep of the property and insurance.  Also condos are not just an urban housing type anymore they are all over the place.  So even getting a detached unit inside of a condo complex sounds like a good financial move for the borrower.
And that is just that a home be it an SFR or a condo is just that a financial move.

As those who work in the mortgage industry we need to learn to love the products we sell just as our borrowers fall in love with the units they want to buy.  In the end even if it is more paper work, and studying on anyone from the broker to the post closer our jobs are to help people reach the aspect of the American dream about home ownership and making that very special financial discussion.   Love it or hate it that’s our job.  So, I again recommend to learn to love the condos.  They are not going anywhere, and as we share the passion of what we do so should we share in a love of a good condo.

New Conversion Projects and What Home Buyers Should Watch For.

By Stephanie Diana Wilson- Gast

So many home buyers or prospective borrowers know what a new Conversion Project is or how it will affect their purchase or refi.  Many think they are buying a newer or newly remodel project so it will last longer, What it really means at best it could result in a  bit more time on the underwrite at worst it could be a decline on the loan. There are a few things that a prospective buyer can ask the HOA to see up front if the property will be worth the effort.  conversion.jpg (530×350)

First as usual the CYOB always discuss a property purchase or refi with your loan officer, Realtor, and underwriter.   All property financing is work towards wealth management and should never be taken lightly.  

Now that’s out of the way lets look at key things to keep in mind about conversions.

Is it New or Established?

First Off FNMA guidelines regard conversions that were completed 3 years from the date of the underwriting as new. If the conversion was completed longer than 3 years of the day the file is being underwritten and it meets established guidelines it counts as an established project. This determines if you will need additional documentation for the full review. Such as a occupancy cert for the entire subject phase which is now required on new construction and new conversion project reviews.yorkville-toronto-condominiums-new-construction-four-seasons-private-residences-victoria-boscariol-avant-garde-real-estate1.jpg (1800×1350)

What was it converted from?

There is a trend of apartments going condo and old warehouses being converted into trendy lofts. As many know FNMA wants to know if they were a hotel or motel and converted to a condo to make sure it’s not a potential condotel.

Loft-Barcelona-warehouse-conversion-2.jpg (1000×666)

However, there are those projects that are converted from apartments or co-ops to condos. These kinds of projects as new conversions FNMA isn’t fond of. However, check with your underwriter if the company they work for will do an exception or if Freddie will take the file?

08home.190.jpg (190×210)

If it is a new conversion and structural is the conversion complete?

Projects that have been converted physically or just on paper as an investor or underwriter there needs to be verification that the conversion is complete. Or at lease that the phase the subject unit is located in is complete. If the subject legal phase is complete then again additional documentation will be required.

Is it a Full Gut or a Non Gut Conversion? And was it a rehab?

Now I personally get asked this a lot. What is a full gut and a non gut? So, full gut is a conversion or rehab where the project is gutted down to the beams and studs. A non gut is as you would think the opposite of a full. Non guts can cause an issue with a lender’s secondary marketing department and also require additional documentation. Which means as an investor additional time will be needed.

Remember buying a condo whether it is an investment or a new home three things need to be considered when taking out a loan. Time, cost and worth. Now with this information that new conversion project unit you have been eye balling will seem smarter with those factors weighed into your purchasing decision.

Hopefully this post helps you regardless if you are an underwriter or a perspective condo unit buyer or developer. If you enjoyed this post share with your friends and show some love. Follow us on wordpress and twitter.  Also like my page on facebook https://www.facebook.com/pages/Condo-Land/316141131843472?ref=hl