Condominium black lists

A couple of weeks ago, I had put my hand on a list from Bank United, where they were "blacklisting" many condominium buildings in South Florida, mostly in the area of downtown Miami and Brickell Avenue.

This is one more issue that real estate owners have to tackle today.

Finding a buyer is difficult enough. Finding a cash buyer for a unit at one of these buildings, is way harder.

Loans to foreign nationals are being made but at a much higher interest rate, and with larger down payments and this has discouraged many such buyers.

This new issue is complicating ever more the situation in areas already hit by foreclosures, high interest mortgages, and buyers' backing out of their contracts.

The problem is spreading, as I found out today in an article published in the

Daily Business Review:

February 13, 2008 By: Polyana da Costa

Beatriz Bustos has been trying to sell her Brickell condo for about a year.She has found a few prospects and has gotten close to sealing a deal several times but all the potential buyers ran into the same obstacle — they couldn't get financing.

"No one qualifies for financing," said Bustos, who is facing foreclosure.

But the problem isn't the buyers, it's the building — the Vue at Brickell.

What Bustos didn't realize is that her building has been blacklisted by lenders as have dozens of other condos in South Florida. Banks and mortgage lenders compile lists of buildings they find too risky for lending, and they refuse to finance purchases there.

And that further complicates the obstacles faced by owners of condo
units in these buildings.

Bustos bought the condo for $690,000 as an investment in 2005 and now can't afford the monthly expenses of nearly $5,000 that include two mortgages and association fees.

It's already tough to find buyers in the current market. And this drastically limits options. Bustos and other condo owners like her can't refinance, can't sell and unless they find a cash buyer are likely headed to foreclosure.

The Vue at Brickell is one of dozens of condos across mortgages.

In the Vue's case, the "high foreclosure rate and declining value" in the building is cited by BankUnited as the main reasons the property should be shunned.

The Vue is also on a list maintained by Popular Mortgage, but brokers say the project is widely avoided in the lending industry.
But the Vue is far from being alone.

Local and national lenders continue to add to the dozens of projects to the lists of condos that don't meet their loan criteria. Banks and other real estate lenders are loath to admit they have inventoried projects they refuse to lend in. To avoid controversy, some lenders instead say they keep lists of eligible projects.

The Daily Business Review obtained lists by three large local lenders, including Washington Mutual. Executives at other financial institutions refused to confirm their banks maintain such lists or did not want to comment for this article.

"Many of the lenders are not open about it," said one mortgage broker who asked not to be identified. "But when you send them an e-mail to inquire about a loan and they respond by saying they are not lending in that building, you assume they have an internal list."

These kinds of lists have always existed, said Michel Fayad, managing director of Miami-based American Mortgage Lending, but they were much shorter and didn't have as much impact on a lender's decisions in the past. The downturn in residential real estate — in particular the
condo market — has lenders on high alert.

The Washington Mutual document, which includes eligible and non-eligible projects nationwide, cites more than 40 ineligible projects in Miami-Dade County, about 25 ineligible in Palm Beach
County and about a dozen projects in Broward County.

A BankUnited list shows the majority of the projects the bank has categorized as "non-permissible-condominium projects," are in Miami. Most were added to the list in January.

BankUnited's list also includes the reasons the bank considers the various projects off limits.

In most cases properties are to be avoided for "high investor concentration and declining market value," but some are included because of pending litigation, delinquency issues with the homeowner's association, high foreclosure rates or how many loans a bank already has on units in the building.

The lists include finished buildings and projects still under development.

Prominent projects on BankUnited's list include the Related Group's 50 Biscayne and 500 Brickell; Terra Group's 600 Biscayne and 900 Biscayne, and Cabi Developers' Everglades on the Bay.

Executives at the sales centers for the projects declined to comment and messages left for the developers were not returned.
"Nonwarrantable"

There are a variety of reasons why a building would be branded as ineligible for lending. Most factors reflect criteria set by Fannie Mae and Freddie Mac, but some are based on lenders' internal risk-based criteria.

Loans that meet the standards of Fannie Mae [Federal National Mortgage Association] and Freddie Mac [Federal Home Mortgage Corp.] are eligible to be sold in the secondary market to the two government-sponsored but privately owned mortgage finance giants. For that reason, lenders have always found it safer to issue loans in projects that are eligible to be sold to those companies.

"Lenders need an exit strategy," said Grant Stern, owner of Miami-based Morningside Mortgage Corp. "If a condo is nonwarrantable they may lose that exit strategy."

A building may be deemed "nonwarrantable" if a large number of its condo units are owned by investors. About 70 percent of the building must be owner-occupied for it to be considered suitable to be sold to Fannie or Freddie, Stern said.

The number of pre-sales; litigation involving developers, condo boards, vendors or unit owners; condo association financial problems; and many other factors are also used to measure the risk.

Fannie Mae maintains a list of approved projects and provides lenders with the guidelines and a questionnaire to determine project's eligibility.

A project's eligibility can be revised as the status of the building changes. When a project is found ineligible under Fannie or Freddie guidelines, it may or may not affect the lender's decision but in the past six months the ineligible status has caused many lenders to stay away from those projects, Fayad said.

Lenders also are making decisions exclusive of outside guidelines, said Fayad, who used to work with 45 lenders willing to provide financing in a variety condo projects. That list of lenders has dwindled to about 20.

South Florida mortgage brokers say three Miami projects are notorious for being rejected by lenders — Jade at Brickell Bay, The Club at Brickell Bay and The Vue at Brickell.

The Jade and The Club at Brickell appear on at least three lists of projects ineligible for financing, including lists from BankUnited, Washington Mutual and Popular Mortgage.

Ocean View, a Sunny Isles Beach condo conversion project, appears in multiple lists, according to mortgage brokers, including one maintained by local lender Popular Mortgage.

A West Palm Beach condo conversion project, 2560 S. Ocean Drive, also appears on multiple lists. Representatives of the project's developer, Miami-based VH Capital Partners, did not return calls by deadline. Not all hope is lost

As difficult as it is to find financing, there is hope. Even in extraordinary cases like the Jade, buyers are still able to get financing, but a substantial down payment is required, Fayad said.
He said after many attempts he found a lender willing to finance a Jade condo for a buyer who was buying a unit out of foreclosure from a bank.

Miami-based Sunset Lending approved the loan, but the buyer had to put 40 percent down.

Foreign buyers, who want to take advantage of a weak dollar and who could rescue many condo developers in need of sales, are being asked to put down as much as 70 percent of the purchase price and many lenders won't provide financing to them at all, Fayad said.

Projects considered ineligible for financing by traditional lenders are finding more acceptance from "hard-money lenders," he said, but that comes with a price. Hard-money lenders normally are private investors willing to issue loans on real estate properties that are nonconforming with bank standards. They normally lend on shorter terms with higher interest rates and require lenders to put at least 30 percent down.

Buyers that normally would pay a 5 percent to 6 percent interest rate, should expect to pay more than twice as much when borrowing from "hard-money" lenders. With proper timing, some buyers and owners still might find financing, even if their building does not meet some of the lending guidelines. "I would like to think it can't get any worse," Fayad said. "But some lenders are still catching up. You may find a project listed as ineligible with one lender, but while the other lenders catch up, you may be able to get something for that building. Once they all catch up it will be much tougher."

Real estate broker Alejandro Diaz-Bazan, principal of Miami-based South Florida Foreclosure Group, said the condo market is being forced into a cash-buyer's market.
He is selective of potential buyers he takes on and requires they be pre-approved for loans. Even his high-income buyers are finding limited financing.
"They are putting down 40 to 50 percent of the loan value" he said, citing one client who had a Wachovia account in the seven digits and had to put down 50 percent on a recent purchase of a Miami condominium.

In many cases, if it is widely known that a building has been flagged, a lender that may not have compiled a list won't even take the loan application, he said. "It hurts the value in the building
tremendously." For that reason lenders tend to be careful how they categorize ineligible projects.
Melissa Gracey, a spokeswoman for BankUnited, said the bank's list is "risk-based."

"It's based on a lot of different factors and a lot of them mirror criteria from Fannie Mae," she said. Gracey said she didn't have more information about the lists and that the bank would not have a mortgage department representative available for comment by deadline.

Washington Mutual and Popular Mortgage executives also did not return calls for comment.
Developers of about a dozen prominent projects on the ineligible lists also did not return calls seeking comment on how the lending cutbacks affect their projects. But in many cases, developers are no longer involved and have sold out the buildings.

Before lenders begin to reconsider lending in the troubled buildings, there would have to be a sign of stability, Fayad said. The number of foreclosures would have to drop; more units would have to be owned by residents, not investors; and the condo market in general would need to improve.

But for now, lenders have to get used to realistic lending practices, Fayad said.

"These guidelines always existed but lenders were willing to go the extra mile," he said. "Now they are not, and we are back to giving mortgages to people who should have mortgages." In other words, speculators and risky borrowers need not apply.
"This is just the result of mistakes that should not have been made. A lot of people will be at loss before this market adjusts."

Henry B . Nathan is a Licensed Florida Realtor. Please visit my website to search for:

Florida Condos, Aventura Condos, Fort Lauderdale Condos, Miami Condos, Sunny Isles Condos

Last chance to file HOMESTEAD EXEMPTION

Last chance to file HOMESTEAD EXEMPTION

You must file before March 1, 2008.

Information for Dade County Homeowners.

Property appraiser website:

Applications may be filed with the Miami-Dade Property Appraiser's Office no later than March 1, 2008. Applications can be filed in person at:

Stephen P Clark Center (Government Center)

111 NW 1 Street, 7th Floor.

Miami, FL 33128.

You can also apply for the exemption via U.S. Postal Mail by sending the application to:

Miami-Dade County

Property Appraisal Department

P.O. Box 013140,

Miami, FL 33101-3140

In addition to the application, you must provide one proof of ownership, and two proofs of Florida residency dated prior to January 1, 2008.

Any one of the following Proofs of Ownership can be submitted:

Warranty Deed

Property Tax bill

Notice of Proposed Property Taxes

Homestead Exemption

Automatic Renewal Receipt

Computer Public Value Inquiry printout

Any two of the following Proofs of Florida Residence can be submitted:

Driver's License

Automobile Registration (no lease)

Voter Registration

1040 Income Tax Return filed in Florida or W-2 with Florida address

Intangible Tax Return filed from Florida

Florida Unemployment Compensation Registration

Employment letter with Employer's letterhead

Child School report card or School letter attesting child's registration

Moving van receipt from another county or state

Doctor's letter with Doctor's letterhead

Church letter with Church letterhead

SSA-1099 fiscal year Social Security Statement addressed in Florida

Broward residents can apply online.

Go to: https://www.bcpasecure.net/homestead/index.cfm

Remember that Homestead Exemption has been recently increased by an additional $25,000 (not applicable to school taxes). Homestead Exemption gives the homeowner a valuable protection against future tax increases. Assessed value increases are limited to 3% per year.

You must be a Florida resident, and a US. Citizen or US permanent resident with a 'green card' to qualify for Homestead Exemption.

Henry B. Nathan is a licensed Florida Real Estate Professional.

Please visit my website to search for:

Aventura Condos, Miami Beach Condos, Fort Lauderdale Condos, Hollywood Condos

Questions about 'Portability' in Florida Real Estate Taxes

With the approval of the property tax reform on January 29, many homeowners saw a new window of opportunity. Specially ‘empty nesters’ living in large homes hoped to be able to downgrade and move to smaller places; or the opposite: new ‘up and comers’ prevented from moving to better homes by the fear of very large increases in their tax bills will have a great incentive now.

How will this ‘portability’ work?

There are two elements to be considered in a typical “save-our-homes” tax bill:

The just value or market value,

and the assessed value, which is reached after calculating the maximum yearly increase of 3% since the homesteaded property was purchased.

The ‘portability’ amount is the tax advantage that a ‘save-our-home’ beneficiary can ‘transport’ when moving to a new home, up to a maximum of $ 500,000. It is equivalent to the difference between the just value and the assessed value.

So far so good, but…

A lawsuit has been filed in state court, by a group of citizens who want to overturn the whole ‘save-our-homes’ amendment. They are now saying that they will possibly include the new ‘portability’ exemption in their lawsuit.

Florida Governor, Charles Crist and supporters of the new amendment have stated that the Save-our-homes amendment withstood similar court challenges in the past. However, many Constitutional Law experts think that the portability amendment could be successfully challenged as violating non-residents owners and first time home buyers.

This scenario is adding a large element of uncertainty. People who move now are faced with the possibility of losing the tax deduction if a judge rules that the ‘portability’ amendment is unconstitutional. In this case they would be stuck in a new home, having lost the advantage that was their main reason to move in the first place.

The possibility of derailing the new amendment provision is real, as per the words of Broward County Property Appraiser. However it must be implemented since it is law.

Meanwhile, a curious and unusual issue is faced by County Appraisers. An influx of people inquiring about raising the present “just value” of their homes. That would automatically increase the amount of tax relief that they could transfer to the purchase of a new home.

Since the transferable benefit is calculated by the difference between “just value” and assessed value, raising the “just value” would do the trick.

There are some objections about the validity of these claims. Complaints filed by homeowners have always been about their property being valued too high, not too low. There are some technical issues since the Value Adjustment Board, who decides about these complaints is supposed to decide only if the property is “over assessed”.

So much for the absurdities and inequities that plague much of our tax system.

Henry B. Nathan is a Florida Real Estate Professional. Please visit my website:

www.condo-southflorida.com

Homestead and other exemptions in Florida Property Tax

On January 29, 2008, a constitutional amendment was approved by Florida voters.

It changed substantially the structure of the homestead and “save-our-home” exemptions. Here is where we stand now:

Homestead exemption.

For Florida residents who have filed for this exemption.

- $ 25,000 basic exemption

- Additional $ 25,000 for all homes assessed at $ 75,000 or more. This additional exemption does not apply on the school portion of the tax bill. (about 36%)

- Additional $ 25,000 Senior Citizen exemption. Must be at least 65 years old, and their total household income does not exceed $ 24,214 (amount yearly adjusted for inflation).

This exemption must be renewed annually, including IRS tax return or proof of non-filing.

- Additional $ 500 Widow/widower exemption. Not eligible if remarried.

- Additional $ 500 Disability/Blindness exemption.

- Additional $ 5,000 Veteran Disability exemption. Higher if combat disabled veteran.

- Full Exemption for Veteran service-connected total and permanent disability.

- Full Exemption for totally and permanently disabled persons. Subject to yearly income not exceeding $ 23,604 (adjustable for inflation)

- “Grammy Flat” exemption. When building additions to provide living quarters for parents or grandparents, exemption for the amount of the new construction, up to 20% of the homestead value.

Business Equipment Exemption

A new $ 25,000 exemption. Currently all businesses are subject to an annual tax on tangible property. Small businesses with less than $ 25,000 in tangible property, are not required to file anymore tangible property tax returns.

Save-our-homes

This amendment, approved in 1992 limits the increase of assessed values of homesteaded homes to 3% per year.

Portability of Save-our-homes.

Homesteaded owners can move this benefit from one homesteaded home to another, up to $ 500,000. To be eligible, the new property should be purchased within two years of abandoning the Homestead of the previous home. This portability can be used an unlimited amount of times. One way to calculate this is to calculate 85% of the new home purchase price, then divide that number by the 2007 “just value” of your current home. Multiply that amount by your present "save-our-homes" value and the final result will be your estimated new Save our Home value. (this is only an approximate calculation). Another way to explain is: The difference between the "just value" of your home and the "save-our-homes" assessed value can be transferred as a reduction to your new home assessed value, up to $ 500,000. We anticipate some confusion to be clarified by Florida Department of Revenue advisory opinions.

All other properties

that do not have the homestead protection, such as commercial real estate, rental properties, second homes, investment properties have a new protection. Their taxable value cannot increase more than 10% per year. This cap does not apply to the school portion of the tax bill.

I am a licensed real estate and mortgage broker in the state of Florida. Please visit my website:

http://www.condo-southflorida.com