Editor’s Note: An earlier version of this article incorrectly described parameters for exceptions to Fannie Mae’s rule under which condominiums in developments where one entity owns more than 10 percent of the deeds are not considered loan-worthy. The article below has been corrected.
By Susan Dickson
CARRBORO â€“Â At their first meeting of the 2012-13 season, the Carrboro Board of Aldermen took on an issue that is preventing some local homeowners from refinancing their mortgages or selling their homes.
Fannie Mae, one of the leading purchasers of residential mortgages, recently passed a rule under which condominiums in developments where one entity owns more than 10 percent of the deeds are not considered loan-worthy. In Carrboro and Chapel Hill, the Community Home Trust owns more than 10 percent of units in a number of developments, including Pacifica Cohousing.
â€œThis is huge nationwide,â€ board member Jacquie Gist said.
Following the subprime mortgage crisis, Fannie Mae is in government receivership and managed by the Federal Housing Finance Administration.
Pacifica resident Greg Gangi told the board that he recently attempted to refinance the mortgage for his condominium, but was denied by three banks. The third bank told him that he was denied due to the Fannie Mae rule, so Gangi solicited help from Robert Dowling, executive director of the Community Home Trust.
Carrboro encourages developers to provide a stock of affordable housing in developments, and those units
become owned by the Community Home Trust.
Dowling said the home trust had faced similar financing issues before, but that heâ€™d never heard of Community Home Trust units impacting the financing of market-rate homes. Upon hearing from Gangi, Dowling said he contacted the community land trust product manager at Fannie Mae, who said that exceptions to the rule can be made on a case-by-case basis. However, Dowling added, banks are unaware of the potential exception and approve and deny loans accordingly.
â€œBanks are struggling with bad loans right now,â€ Dowling said. â€œItâ€™s easier just to say, â€˜No, we donâ€™t do that.â€™â€
However, he noted that the home trust has never allowed a foreclosure on one of its homes, and that banks should view the organization as low-risk.
Under the Fannie Mae rule, it would appear that â€œperhaps half the condominium developments in Chapel Hill and Carrboro donâ€™t qualify for Fannie Mae financing,â€ Mayor Mark Chilton said.
â€œHow many people are being told they canâ€™t borrow money because of the Community Home Trust?â€ Dowling asked, adding that the home trust could attempt to educate banks based within the local and surrounding areas in order to prevent that.
The board members voted unanimously to send a letter to Orange Countyâ€™s elected delegation to ask for their assistance in addressing the problem and educating lenders.