Bank won't give me a 30 year fixed mortgage (loan, fixed rate, foreclosure)

[JimHGB]

I live in Wisconsin and currently have a 10 year ARM (5.375 with 6 years left) primary mortgage on a Condo (value is $230,500 and I owe about $155,000). I applied for a 30 year 5.00% mortage with my credit union to refinance the balance and the application was accepted. A few days later they called and said they were working with Fannie Mae and that Fannie Mae wouldn't finance a condo. The credit union then offered me a 15 year fixed mortgage, but I really need a 30 year mortgage. I called them back the next day and told them to provide me with something in writing about being denied the 30 year mortgage, because I was going to write my congressman about Fannie Mae. The next day they called and said it wasn't Fannie Mae, that they didn't want to do the 30 year on a Condo but were still willing to do the 15 year. Why would they be willing to do the 15 year and not the 30 year?

[bornandraised atl]

I would speak to a few more lenders before you write the letter...I will try to avoid too much 'mortgage speak' and try to as plain as I can...

This credit union may 'keep' or 'Portfolio' all the loans it originates. Lenders have portfolios that are catered to a specific loan - Fixed rate, Single Family, >700 scores, etc might be one, another may be a 5/1 ARM, single family, >700 scores, etc...think of it as a 'bucket'...lenders want all their buckets to have the same contents so that it can be rated, priced, and monitored. Each bucket has a different price or risk so each one has a different price (this is the difference between rates on Fixed, 5/1 arms, 15 year - etc).

So - with that being said - your credit union may have determined that condos with certain criteria - high rise, low rise, new, old - OR - just condos in general do not fit into one of their 'buckets' -could be past poor performance with condos, whatever---they do not want it in any of their 'buckets'.

It is their credit decision to not offer a 30 year fixed condo loan - this is ok - credit unions are not always the best mortgage companies - great bank - just not the best Mortgage people...

Traditionally a 15 year mortgage has the lowest defaults of any mortgage program and that may be why they offered you a 15 year fixed - they can put it into their best performing 'bucket' with the lowest risk...

just my two cents...

I would recommend to do your homework, talk to a lender from another bank and talk to someone at a mortgage company---tell them the full story and ask them for some options. compare intelligently, and go with the best one for your long term financial plan.

Good luck...

[JimHGB]

Thanks. That was very helpful.

[SmartMoney]

He who has the gold rules. You can write your congressman, senator, or any elected official, but none can force the issue (at least yet) on business practices as long as they are legal.

I am also of the opinion condos are going to be a serious up and coming problem in our country. Before someone lets their mortgage payments slip, they typically let the condo fees slide. We are seeing delinquencies of 6 months or more on foreclosure units. Add to it, one entity owning multiple units also is a red flag there is a problem. (Like a bank or FannieMae). These fees in arrears place an unfair burden on those paying their mortgages and condo fees on time. One catastrophe can bankrupt an HOA. FHA requires 51% owner occupancy to finance a unit - and a vacant or foreclosed unit is not an owner occupied unit. Fannie and Freddie just recently added what is called Loan Level Pricing Adjustments (LLPA) to condos, and I am certain with all of these facets in mind.

It's like watching a train you just know is going to derail - but there is nothing you can do to stop it. Personally, I would not purchase a condo right now, things are just too unstable. That $250 condo fee can easily triple if things don't go right. As for the credit union limiting 15 year terms, that could be their way of discouraging these loans. Credit unions are member owned and their directive is to benefit their membership as a whole. Obviously, the Board of Directors feel condo loans represent a risk and are protecting the membership. Hopefully, I am wrong, but right now, I am turning away customers that we financed 2 and 3 years ago because their condo no longer meets Fannie criteria. This is one refinance I would do sooner than later.

[Thatguywho]

Originally Posted by JimHGB

I live in Wisconsin and currently have a 10 year ARM (5.375 with 6 years left) primary mortgage on a Condo (value is $230,500 and I owe about $155,000). I applied for a 30 year 5.00% mortage with my credit union to refinance the balance and the application was accepted. A few days later they called and said they were working with Fannie Mae and that Fannie Mae wouldn't finance a condo. The credit union then offered me a 15 year fixed mortgage, but I really need a 30 year mortgage. I called them back the next day and told them to provide me with something in writing about being denied the 30 year mortgage, because I was going to write my congressman about Fannie Mae. The next day they called and said it wasn't Fannie Mae, that they didn't want to do the 30 year on a Condo but were still willing to do the 15 year. Why would they be willing to do the 15 year and not the 30 year?

take business elsewhere. sounds crooked or out to take advantage of you.
Never do business with them again. Ever. Pull your money out.

[JimHGB]

The thing is that although it's classified as a Condo, it is actually a stand alone unit. There about 30 of them in the complex and we all pay $100 a month association fee for landscaping, snow removal and up keep of the common areas.

[SmartMoney]

Condo is not a property description, but a title description.

Condo, you don't own the land.

Single family/townhouse, you own the land.

A condo has the same issues regardless of the property description.

[chet everett]

Smart Money is DEAD ON, I have very vivid memories of a prior "condo meltdown" that happened when a lot of "first wave" suburban condos were unsell-able because of high intrest rates in the early 80s. The owners that turned them into rentals were not equipped to be landlords(meaning they'd rent to wover answered their ad..), the remaining owners got fed up with having undesirable neighbors and that is when many condos put restrictions on rentals. Which immediately made the units LESS VALUABLE to investors. Ugly.