Condominium sales may play a more significant role in the mortgage origination market in the next few years, according to CoreLogic. In the Video Spotlight below, CoreLogic's Jacqueline Doty, VP of Industry Solutions, explores the state of condominium lending.
According to Doty, condominium originations have held steady at around about 8% of total mortgage originations for the past few years, and hotspots with a particularly high share of condo sales include Washington, D.C. (37%) and Hawaii (42%).
CoreLogic also notes that the condominium market has become tighter than ever, with the average condo staying on the market for only 60 days. The influx of millennial homebuyers is also set to increase the demand for condominiums.
Doty notes that, moving forward, lenders need to keep a few facts in mind.
“Lenders looking to take advantage of a potential condo rush may find that they’re being unnecessarily strict when approving condo loans,” Doty said. “With the delinquency rate of condo loans sitting about 2% lower than that of single-family homes, there could be room to loosen condo lending guidelines.”
Doty notes that Freddie Mac and Fannie Mae played a part in this “loosening.” In order to make it possible for more condo loans to be originated and sold to the GSEs going forward, Fannie and Freddie have increased commercial space allowances from 25% to 35%, relaxed the requirements for small 2-4 unit condo projects, streamlined underwriting for certain low loan-to-value and investor loans, and allowed certain types of minor litigation to be present in the project when the litigation won’t have a significant impact to the financial stability of the project.