Comments on: Velocity in the Gulch Condo Sales Update

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[...] Velocity in the Gulch Condo Sales Update [...]

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[...] Velocity in the Gulch Condo Sales Update | Nashville Real Estate [...]

By: Hooper11

Hooper11 — Sun, 08 Nov 2009 05:09:37 +0000

i think fha will keep the floodgates open, at least until the spring. but projects like this one that have no rental policy are likely to become roadkill when the political winds eventually shift in dc. better to buy in a building that has docs/policies that gty you wont be in harms way later.

By: Hooper11

Hooper11 — Sun, 08 Nov 2009 05:05:36 +0000

why didn't they just convert this to apartments ? i see a fractured condo coming.

By: Hooper11

Hooper11 — Sat, 07 Nov 2009 23:09:37 +0000

By: Hooper11

Hooper11 — Sat, 07 Nov 2009 23:05:36 +0000

why didn't they just convert this to apartments ? i see a fractured condo coming.

By: Falcon2

Falcon2 — Wed, 04 Nov 2009 13:31:35 +0000

I think everyone agrees that regardless of whether your talking about FHA, FNMA or FRMC, all of these agencies are going to decertify projects that don't meet the 51% owner occupied test. In Nashville there are 5 new projects larger than 175 units: Icon, Encore, Viridian, Velocity and Adelicia. All of these buildings except for Icon and Velocity have rental restriction policies in their Bylaws that will forever prevent these buildings from falling out of compliance with this key test. To my knowledge, none of Bristol's projects (Icon, Velocity, Bristol West End, Bristol on Broadway) have any restrictions on the number of units that can be leased. Doing this makes it easier to sell to investor buyers but unless those investors cash out early to user buyers, in my opinion, there will be a dear price to be paid. How easy is it to get a loan in Bristol West End these days ?

So, the brokers and mortgage brokers for Icon and Velocity can speculate about how many of their buyers are investors and how many of their 2 year old contracts are still likely to close, but I don't think they can offer any definitive assurances that the building won't eventually be more than 51% rented and, therefore, at significant risk of not meeting the key test to qualify for conforming loans. I hope all brokers that have clients considering these buildings are making sure their clients understand this risk and I commend Grant for making this blog available to help brokers and clients alike get educated.

By: TNRE

TNRE — Wed, 04 Nov 2009 02:14:36 +0000

Under Mortgagee Letter 2009-19, it looks like Veloc. may be able to get grandfathered in for approval since they were previously approved (see p 9 Sec. XII). However, they still need to comply with FHA requirements, which appears to include the owner-occupancy condition on their prior approval.

By: John_23

John_23 — Wed, 04 Nov 2009 02:04:10 +0000

I don't think it matters that there are FHA loans that have already gone through on Velocity. The rules have recently changed. The link that you provided shows that Velocity is only approved under the "pre HRAP / DELRAP" approval method. Here's the link again. https://entp.hud.gov/idapp/html/condo1.cfm .

The new FHA approval process which is the HRPA / DELRAP went into effect on 11/2. See ( http://www.hud.gov/offices/hsg/sfh/hsgsingle.cfm ) , and then scroll down to title "Notice on FHA Condominium Processing."

Under this program, "At least 50% of the units of a project must be owner-occupied. This is what page 4 of the "Mortgagee Letter 2009-19" says. A link to that letter is in the same location.

For condos under construction or in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold units. This is also on pg 4.

If this more flexible standard is allowed for Velocity (and I don't know if this is possible), they have roughly 78 owner occupied units out of 153 total units sold and/or under contract. 78 / 153 = 50.98% Even assuming that this more flexible measure can be used, they are barely sqeaking by.

However, if you take 78 owner occupied units out of 263 units overall, you have just under 30% owner occupancy. UNLESS the more flexible standard is used, and even if it were it would only be a temporary measure, I SEE NO WAY THAT A BANK CAN FOLLOW THE RULES AND PROVIDE FHA FINANCING ON THE VELOCITY AFTER 11/02/2009.

Note that the new rules "allow lenders to determine project eligibility" (p. 1 of Mortgagee Letter 2009-19). However, there are very steep penalties for falsely certifying documents such as the owner - occupancy certification. See page 9.

Thoughts??

By: John_23

John_23 — Wed, 04 Nov 2009 00:24:19 +0000

I don't think the issue is recertification, it's with the 51% owner-occupancy requirements. Please see my comments below.