What are the banks doing with all of our bailout money? Getting fat and making the borrowing process miserable even for those with stellar credit, great jobs, and high liquidity.
A current buyer of mine is supposed to be closing this coming Friday on a $1.7M condo in a new development project that is almost entirely sold. She could pay cash for the property but decided to take out a small loan for some tax relief.
Last week we found out that her lender, Wells Fargo is being hamstrung by Fannie Mae. Fannie Mae is insisting on reviewing the condominium’s operating budget which is not typically made available for review. The building’s financial statements which have been delivered to the lender show a healthy reserve fund in excess of $1.2M and an operating profit (many buildings run at a deficit). Fannie has decided that unless the managing agent will supply a letter attesting that the operating profit will be transferred to the reserve fund, they will NOT fund the loan. Here’s what Wells Fargo must comply with according to Fannie Mae:
- Lenders must review the homeowners’ association budget (the actual budget for established projects or the projected budget for new projects) for all projects except two-unit to four-unit projects. This review must determine that the budget is adequate (i.e., it includes allocations for line items pertinent to the type of condominium), provides for the funding of replacement reserves for capital expenditures and deferred maintenance (at least 10 percent of the budget), and provides adequate funding for insurance deductible amounts.
We are being told that no exception can be made to this policy therefore Wells Fargo is not permitted to fund this loan through Fannie Mae. So a buyer putting more than $1M down on the purchase of a $1.7M home finds herself without a mortgage and possibly unable to close this week.
I ask you this…If this buyer isn’t approved for a loan, where is all of that TARP money?
My buyer wants some TARP!