To help lenders meet the growing demand for mortgages on condominiums, Fannie Mae is in the process of adopting a more straightforward process for project approvals and loosening the rules concerning pre-sales and investors.

The update to Fannie Mae's guidelines is in response to lenders' requests for clearer, more concise rules that will allow them to originate more loans for what has increasingly become an affordable alternative to single-family detached homes.

According to the National Association of Realtors, sales of existing condominiums and cooperatives hit their ninth consecutive annual record in 2004. There were a total of 970,000 existing condo and co-op sales last year, up 8.0 percent from the previous record of 898,000 units in 2003.

(No similar statistics are available of new condos, which may be apartments or townhouses.)

Although Fannie Mae doesn't make loans to consumers, it is an essential part of the mortgage market because it provides liquidity for thousands of lenders that deal directly with borrowers.

The company helps lenders keep the money flowing by purchasing their loans and reselling them to investors worldwide. For loans to be eligible for purchase, though, they have to be up to Fannie Mae's standards.

Since 1968, Fannie Mae has provided $6.3 trillion of mortgage financing for 63 million families.

When it comes to condominiums, Fannie Mae requires that entire projects be approved, as opposed to just the particular apartment or townhouse being purchased. It also refuses to buy loans in condo communities that are still under construction until a certain number of units are sold, and it won't purchase loans in places where there are too many non-owner occupied units.

Fannie Mae has not yet said what the new limits on pre-sales and investors will be. But it has revealed that the changes to its guidelines will cover four categories based on the processes by which a single-family mortgage loan secured by a condominium unit will be approved:

• Limited Review -- The most streamlined way to gain approval to deliver a condo loan will be expanded with broader eligibility criteria, particularly when a loan is evaluated by, and processed through, Fannie Mae's automated underwriting system.

• Expedited Review -- This new lender-delegated review category will allow more condo projects to benefit from a streamlined process and more flexible eligibility guidelines, including reduced pre-sale requirements. Expedited Review will be supported by a new web-based online lender registration and project management system.

• Streamlined Review -- For those projects that are not eligible for expedited review, the current review process will be simplified, with reduced pre-sale requirements on certain projects and increased allowable investor concentrations.

• FHA Condominium Approvals -- Fannie Mae will begin accepting most Federal Housing Administration (FHA) condo project approvals without requiring a separate Fannie Mae project acceptance, saving lenders time, money and eliminating duplication of effort.

Two years ago, the FHA took the gloves off planned unit developments when it dropped its requirement that the entire project had to be pre-approved as a condition of insuring mortgages on houses in that particular community. Under the FHA's old rules, the agency subjected these large-scale developments to lengthy reviews sometimes lasting several months.

The revised condominium project standards will enable more lenders to participate in condominium lending, and boost the availability of condo financing in smaller markets, according to Tom Lund, acting head of Fannie Mae's Single-Family Business unit.

Published: April 27, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.