Every time we submit a loan to our investors, we need to provide a homeowners association checklist. This is completed by the management company or the President of the Board. The checklist asks questions such as if the units are being used as a primary, secondary or investment property along with other questions about the association’s financial strength and property details. From the Fannie Mae guideline book, “Fannie Mae considers projects with any of the following characteristics to be hotel type projects and therefore, ineligible”:

• Central telephone system
• room service;
• units that do not contain full-sized kitchen appliances;
• daily cleaning service
• advertising of rental rates
• registration service
• restrictions on interior decorating
• franchise agreements
• central key systems
• location of the project in a resort are
• project converted from a hotel.

We have encountered these issues as well:

• Too many units are rented versus primary or second homes
• More than 15% of the units past due on their HOA dues
• Nightly rental units advertised on line

Please call us with any questions on Steamboat Springs condos.

Holly Rogers,  970.875.1636

Kathryn Pedersen ,  970.875.1609

The post Financing Steamboat Condos appeared first on Steamboat Ski Condos.

The reality of today’s market is that the condominium development has to get approved before the condominium buyer is approved.  And no matter how high a borrower’s credit score is or how many assets a borrower has, the fact is that some Steamboat Springs condo developments are not able to be financed in today’s lending environment.

The good news is that banks vary as to what developments they will finance. All have different underwriting rules, so some Steamboat condo developments may be allowed with certain lenders.

Here are three reasons Steamboat condominium developments may be turned down:

• Occupancy Rate – this is the percentage of owners who actually live in the complex vs. investors who rent their condos out.   Typically, lenders want to see 51% or more owner occupants.
• HOA Delinquency Rate– the percentage of overall owners who are delinquent on their HOA dues.  Anything over 15% delinquency is a red flag to the lender.
• Litigation– is the development involved in litigation?  If it is, it’s going to be very hard to finance.
• Time Shares—Some Steamboat developments have a few condos that have been split into fractions or timeshares.  Others allow timeshares in their governing docs, even though none of the condos have been split into fractions.  Anything that has to do with the property and says “timeshare” or “fractional”  is not good.

(These Steamboat condo developments all had sales in January where the buyer financed the condo:  Fish Creek Hill, Walton Village Condo, Wildhorse Meadows – First Tracks, Storm Watch @ Steamboat,  Sunray Meadows, and Pines at Ore House.)

A few ways to get around the lending issue:

• Use a local Steamboat lender.  Our lenders generally know if the condo might have any issues.  If they can’t do a loan, they will refer someone who can.
• Get a HELOC on your primary residence.
• Use a Steamboat bank who will make a portfolio loan.
• Consider owner financing.
• Pay cash.

Interested in purchasing a Steamboat condo or seeing if financing is available?  Please call 970-846-8284 or contact us with your questions.

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Government-backed loans currently make up over 90% of mortgages, so if the condo development doesn’t fit into the current Fannie Mae and Freddie Mac guidelines, conventional loans can be difficult to find. In Steamboat, things like front desks, nightly rentals, and timeshare language in the covenants are all red flags for conventional financing.

These challenges to financing resort properties are being noticed and may start to change.

Sarah Thorsteinson, the Steamboat Springs Board of Realtors’ Government Affairs Director, has this to say about financing issues in resort real estate markets like Steamboat Springs’:

Condo Financing Issue Finally Making Waves In Washington:
For years, the Colorado resort areas have clambered to NAR that condo financing rules were killing the local markets, and that the FHA, Fannie Mae and Freddie Mac rules needed to be addressed. It was clear for the first time this year in Washington that the condo financing issue is beginning to stick. Congressman Polis talked about his bill to address workforce housing condo rules, NAR had talking points on FHA condo rules that need to be addressed from a regulatory perspective and there is a letter being circulated by Members of Congress telling the FHA to take action. As of this morning, NAR reached out to the resort areas and offered to request a waiver or exemption for resort areas. The Glenwood, Steamboat, Summit and Vail Boards will be working with NAR to draft and request the waiver for resort areas. Due to the Washington political climate, it is possible that
no changes will be made this year, but it is inevitable that the issue will be addressed in GSE and housing reform next year.

For more information on what Steamboat properties are easier to finance, please call us at 970-846-8284.

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Lenders won’t finance anything that doesn’t meet those guidelines, so condos with front desks, nightly rentals, more than 50% of the development not owner occupied, etc, cannot get conventional 15- and 30-year loans.  In Steamboat, those developments include popular condominium developments like Trappeurs Crossing, Trailhead Lodge, The West, The Phoenix, Bear Claw, etc.

Fortunately, the condo financing rules were updated last week and we are hopeful condo lending will get easier.

Read the letter below from Sarah Thorsteinson, the Government Affairs Director for the Steamboat Springs Board of REALTORS®:

On September 13, HUD issued a Mortgagee Letter with long awaited updates to condo financing rules.  While the proposed rule does not go far enough, there are improvements. See below for an overall summary of the proposed changes.

*   The “under construction” project type has been expanded to include projects that have been completed for less than one year and projects that are gut rehab conversions. The “under construction” designation also applies to legally phased projects.

*   “Newly converted conversions” clarified to include project applications submitted for approval within two years of the date of the conversion; after two years, existing project requirements apply.  Pre-sale lowered from 51% to 50%, and developer ownership tolerance increased from 49% to 50%.

*   Non-residential/commercial space exception requests for projects that exceed the 25% limit on nonresidential use must be processed by the jurisdictional HOC under the HRAP process.  Project exception requests that exceed 35% nonresidential use must be submitted to the Philadelphia HOC for processing under HRAP.  The package of documentation/exhibits that must accompany an exception request has been expanded to include marketing and neighborhood analyses, photos of the project and neighborhood, and detailed information about the commercial tenants and lease terms.  Exception requests will be considered for up to 50% nonresidential use (and possibly higher if specifically approved by the FHA Commissioner or designee).

*   Investor ownership percentage in existing or non-gut rehab projects increased from 10% to 50% at time of project approval provided at least 50% of the units have been conveyed or are under contract as owner-occupied. Unoccupied/unsold units owned by developer/builder are not considered investor owned if not previously rented/occupied.  Eligible nonprofit/government programs are subject to the same investor and owner occupied percentages.

*   Definition of “delinquent” HOA dues changed from more than 30 days past due to more than 60 days past due.

*   Additional fidelity insurance options for management companies.

*   Project certification language is softened by acknowledging reliance on attorney’s advice for compliance with state and local condo laws and removing previous language that person certifying has no knowledge of circumstances or conditions that may cause a mortgage to become delinquent.

*   Pre-sale requirements for proposed, under construction, or gut rehab–minimum owner-occupied requirement of 30% of the declared units. Legally-phased projects must meet 30% presale and 30% owner-occupancy requirements.   Unoccupied and unsold units owned by the builder/developer are not considered as investor owned unless the unit is rented or has previously been occupied.

NAR worked with the NAHB and the Community Associates Institute on seeking the following changes:

(1) the increase in investor ownership percentage for existing projects,

(2) the change in the definition of delinquent HOA dues from 30 days past due to 60 days past due,

(3) the softening of the language in the project certification statement and

(4) greater flexibility on the percentage of non-residential use in a project.

NAR was disappointed that HUD did not reinstate the previous FHA condominium spot loan program, whereby an individual condo unit in a non-FHA approved project can be eligible for FHA financing if certain requirements are met.  NAR  suspects that not having a FHA condominium spot loan program available to buyers in older condo projects that do not have FHA project approval is adversely affecting a significant number of potential home buyers and particularly, first time buyers.  NAR is also disappointed they did not address the owner/occupancy ratio.  NAR will continue to work with coalition partners to get these items back on HUD’s radar. There will be another comment period on the proposed rulemaking before they go into effect next year.

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