Re: co-housing unacceptable to Fannie Mae?!?
From: Sharon Villines (sharonsharonvillines.com)
Date: Tue, 24 Apr 2012 11:45:26 -0700 (PDT)
On 24 Apr 2012, at 1:56 PM, Lyle Scheer wrote:

>    I'm going through a mortgage process, and hit an underwriter who is
> telling me, "the project is unacceptable to Fannie for two reasons right
> off the bat.  One, the project is a Co-Housing Community and second [has
> a right of first refusal clause]"

Fannie Mae can't say they are against "cohousing." For one thing, cohousing 
groups have many different legal structures — it's a nonsensical statement. 
Perhaps Fannie Mae won't fund coops or something and this person is 
interpreting the guidelines in error. As long as you are incorporated or 
legally registered according to real estate law, according to our members who 
should know, that can't be an excuse.

I've asked our financial team to confirm but the person who had difficulty with 
Fannie Mae just found another lender. Mortgage brokers are not all the same. 
Some are very smart and know how to work the system. Some are lazy and pick the 
low hanging fruit. You may have to find another one. 

Mortgage brokers also have reputations. Clients of a good good broker are given 
different treatment, and brokers choose bankers they know and like. This is a 
business arrangement — they all make money.

We decided that we liked our right of first refusal clause more than we liked 
Fannie Mae so we are keeping it. One thing we did consider was adding a clause 
that says "except in the case of foreclosures" or something that says it 
doesn't apply to banks. The fear on the bank's part is they will get stuck with 
a property that can't be sold because the community keeps refusing buyers. This 
is one reason coops have difficulty getting financing — they do have this 
right. But foreclosures take a long time to play out and we believe that we 
would know if one was in the works. It would be in the person's best interests 
to avoid foreclosure and sell to us so we would be protected in the end. But we 
didn't need the clause in the end so we didn't add it.

We just got approval for FHA financing, and I will post the information that 
was asked about that process as soon as I get it. I would assume that FHA 
approval would also assure Fannie Mae that the place was worth the investment.

And yes, people are finding that the process is much more rigorous now, but 
mortgages are still being granted as freely as before. I refinanced about a 
year ago and my income tax returns were much more rigorously questioned. Even 
though there was an obvious error on the return, I had to file an amendment and 
go to the IRS office to hand it in and get a stamped copy. And my broker 
advised me to use a CPA rather than doing it myself because I could have just 
filed an erroneous amendment and it wouldn't catch up with me until 2 years 
later. And this was an error that had nothing to do with taxes owed or any 
significant income discrepancies.

The assessor had to not only see the inside of my unit but take pictures. He 
said, "If you say you have a balcony, the bank wants to see it." In the past, 
they did a drive by and looked up comparables. I was only refinancing an amount 
equal to ⅓ the market price of the unit with a 25% lower monthly mortgage 
payment than I had had before with a perfect payment record. And it was the 
same mortgage company. They are running scared.

Sharon
----
Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org





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