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wtf is this supposed to mean?
IT MEANS (and I'll spell it out for you in simple words):
People who build condominiums usually sell them before the units are finished, so they will have enough money to finish them and guarantee a return on investment. They don't want to build a bunch of buildings they can't sell later on. Mortgage companies don't want to offer mortgages for buildings that won't get built, either; therefore the builder's bank loans depend on selling a certain number of units so they can afford to complete the work, and units sold after that are sold at a profit.
From the article:
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In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.
It used to be that Fannie and Freddie would guarantee mortgages in condo units where 50% of the units have been sold. That is, a condo builder would have to sell half the units with standard bank mortgages, and after that Fannie and Freddie qualified buyers could start buying units.
Fannie said they were raising that requirement to 70%, and Freddie followed suit.
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In addition to the 70 percent sales threshold, Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble, the paper added.
No where does it talk about relaxing the second quoted standard; if builders are stupid enough to sell units to people who might make delinquent mortgages one time, Fannie and Freddie know they'll be stupid enough to do it again. So they won't back mortgages where it's obvious that the units were overpriced for the cost of living in the area (i.e. causing people to get behind on mortgage payments.)
But the 70% units sold rule is scaring away qualified potential buyers from new condo units, at a time when the housing market desperately needs to move real estate. Basically, this is forcing otherwise perfectly qualified people to have to get used condominiums rather than going to new developments for no good reason.
So one again, the standards for the people applying for the mortgage aren't going to change.
