Dear Mr. President:

Recently, I read a report that listed 65 pending foreclosures with 19 different lenders and fourteen attorneys in just one 150-unit Central Florida condominium property.

Most of these 65 condominiums were purchased for $250,000. Four have foreclosed and have sold for $50,000 cash and less. Based on a $200,000 mortgage, the lender is losing $150,000 per unit. They sell for cash at a ridiculous price, because FHA financing is not authorized in this property.

The real market appraised price with FHA financing is estimated to be about $100,000. If that is true, the lender, with FHA financing, could turn the property over to a broker, and expect sales in the $100,000 range, saving untold wear and tear on the lender who would realize a $100,000 loss, instead of a $150,000 loss on each unit.

FHA approval in this one property would result in about a $ 4 million saving on approximately 80 foreclosures and, no doubt, generate sales for the remaining units owned by the developer.

This property, like so many others, was rightly classified by FNMA as "unwarrantable," meaning FHA financing is not authorized for these condominiums. It is my understanding that the reason it is unwarrantable is that more than 30% of the buyers were investors.

This requirement at any level is hard to measure and accountability is ever harder implement.

Recommendations

1. Offer FHA financing for permanent buyers only for all types of residential real estate including condominiums, regardless of the number of investors and speculators. What the condominiums need now are qualified buyers who can make a small down payment and pay the lower mortgage payments because market prices are so low.

2. Provide conventional financing for second home and investor financing, and require heavy down payments. In fact there are usually fewer parking issues and less use of facilities with investor or second home purchasers.

3. Increase penalties for fraud.

The immediate impact of FHA financing on the condominium market will:

• Provide commercial lenders a quantifiable reason to give the developer more time to sell the units

• Attract real investors in smaller number

• Discourage speculators

• Attract first time buyers

• Give lenders administrative relief

• Save billions in loss prevention

Yes, I know. There is an even bigger issue. Unpaid Association fees and the unknown and little discussed 'pending' special assessments that could leave the buyer unable to make the mortgage payments.

Here's a thought: If you agree to waive FHA requirements, we can figure out what to do about the fees. Some sort of association insurance like the premium insurance might be a concept.

If this isn't done, or something like it, the only choice the condominium market will have, in my opinion, will be bulk sales and auctions, attracting in great numbers the very investors and speculators that FHA financing is attempting to discourage.

Most Respectfully Submitted.

Published: October 14, 2009

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David Fletcher has been a Florida licensed real estate broker and new homes sales and marketing consultant for 30 years. Along the way, he has sold more than $3 billion in new homes and condominium products for developers and builder/developers. He has been broker of record for 16 rental conversions and marketing consultant in 29 lender workouts for major communities and condominium projects, a featured speaker at the National Association of Realtors, and chaired the Florida Home Builder Association's Sales and Marketing Council. In 2008 he was named a 'Lifetime Achiever' by Keller Williams Realty's International Division. You may contact him at or call him at 407.234.2349.