News & trendsMarket conditions

Quote of the day: Blackballed buildings

by Joseph Askins on 2/28/11

“Not only are the banks protecting themselves, but they’re protecting the borrower. There’s a reason the bank doesn’t like that building.”

- Russell Martin, a loan officer for Perl Mortgage, on lenders’ decisions not to offer mortgages for homes in “zombie buildings.” There is no master list of blackballed buildings, but the Tribune says many lenders keep their own frequently updated lists of buildings that aren’t up to snuff, due to factors like the number of renters present, pending litigation, inadequate reserves, or delinquent assessments. Read the full story to get more insight, including several comments from our friend and frequent guest Eric Rojas.

In December Gary Lucido posted one such do-not-lend list at his Getting Real blog. Some of the buildings listed surprised Joe Zekas.

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{ 1 comment… read it below or add one }

Jeff Baird February 28, 2011 at 2:11 PM

Blackballed isn’t really a good word for this. It sounds arbitrary, like it’s at the whim of the individual lender.

Fannie/Freddie won’t lend on units in these buildings because of their guidelines. So individual loan originators don’t bother processing the paperwork because they know the applications will be deined anyway.

This is where good condo association management can save a building from falling into this trap. They need to limit rentals to under 50% for established buildings and under 30% for new buildings (if any are developer owned). And they need to be vigilant in collections and making reserve contributions.

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