I read an article the other day about how would-be condo/coopbuyers in New York-even those with great credit-can be denied amortgage simply because of where their desired unit is located.That's because some major lenders have strict rules about theproperties their borrowers can buy into. For instance, Fannie Mae,and to some extent, Freddie Mac, probably won't give you a mortgageif the condo you want is in a building with a lot of commercialspace. You'll also be declined if too many of the property's unitsare held by one entity. So say you're shopping for a condo and findan awesome deal at a newly constructed building where thedeveloper, in order to sell units in this tough market, has cutprices. In the example given in the article, Fannie declined oneborrower's mortgage application because the sponsor still ownedabout a quarter of the units. That borrower was able to get awaiver after Fannie did a deeper examination of the building'sfinances, but it took some time. In another instance, one borrowerwas declined a refinance because commercial tenants occupied 40% ofthe building. That borrower is currently going through an appealsprocess. It's a little bit of a Catch-22, isn't it? The developeris trying its best to sell the condos in its building. Buyers can'tget mortgages because the sponsor still owns too many units. Ifbuyers have no funds, there's no one to buy the units, leaving themin the developer's hands. Oy. Fannie Mae maintains its policies areflexible, and in most cases, borrowers do eventually get approvedafter a long process and piles of paperwork. Still, the homebuyingprocess, especially for first-time buyers, is a daunting one as itis. It's also a bit concerning that folks shopping for a condo inone of the biggest markets in the country would face suchchallenges, especially in today's environment. Methinks someparties (((cough, lenders, cough))) aren't doing all they can to"help solve the nation's housing problems." Sure, a lax attitudetoward the mortgage approval process played a major role inbringing us into this mess, but I think that, in some cases, itwouldn't hurt to ease up on policy.

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