Freddie Mac eases rules for condo sales in Fla. in effort to help market

Freddie Mac easing lending rules on Fla. condos

MIAMI — Freddie Mac is moving to buoy the battered Florida condo market, waiving lending rules that made it harder to buy and sell units in many condo buildings.

Freddie Mac said Wednesday it will back mortgages on units in financially troubled condo developments as long as the seller’s loan is already owned or securitized by the mortgage finance company.

The announcement is a reversal by Freddie Mac, which had been rejecting mortgages for units in condo developments with low occupancy and high delinquency rates for condo association fees.

The change, intended to increase financing availability for Florida condos, is effective Thursday. To qualify, the closing date for the new mortgage must be on or before March 31, 2011.

Florida’s once-burgeoning condo market has been hit hard by foreclosures, falling prices and high inventory caused by overbuilding. Condo prices have fallen by half since 2006 in many parts of the state.

Condo associations with a glut of empty units have struggled to collect fees, causing buildings to fall into disrepair and forcing associations to delay improvements.

The condo market woes led Freddie Mac to implement rules governing mortgages in troubled buildings. Units in condo developments where more than 15 percent of owners were delinquent on their association fees could not get Freddie Mac financing. Also, Freddie Mac would not guarantee mortgages in developments unless at least 70 percent of the units were occupied.

The rules were meant to ensure that a building was in good shape and there were enough owners to pay for maintenance and preserve the value of the property.

But those same rules led to complaints from buyers as well as condo associations and developers, who saw them as obstacles to getting empty units sold and occupied.

Developers may now have an easier time selling units.

“Without a doubt, the condo developers that already have Freddie Mac loans in their buildings will be dancing a jig tonight because its the best news they can get,” said Jack McCabe, president of McCabe Research & Consulting, a real estate research firm based in Fort Lauderdale, Fla.

Freddie Mac’s sibling company Fannie Mae announced a separate plan for Florida condos earlier this year.

Fannie Mae is reviewing hundreds of condo projects in the state that currently don’t qualify for its loans. Buildings deemed stable after the review will be given a special approval.

If projects receive special approval, lenders will be allowed to offer mortgages to homebuyers and sell those loans to Fannie Mae, which pools them into bonds and sells them to investors.