Catch-22" is the name of a novel written by Joseph Heller in the early 1960s that is considered by many as American classic. The jest of the novel has to do with the sanity or insanity of a World War II bomber pilot. And the same situation is now the norm for the mortgage marketplace we have occurring right now.
The Random House Unabridged Dictionary defines a Catch 22 situation as "a frustrating situation in which one is trapped by contradictory regulations or conditions," much like the current Fannie Mae and Freddie Mac underwriting guidelines.
As an example, I recently had clients wanting to purchase a new home, a condo, in a complex with a full-time management company. The Freddie Mac rules require that the condo complex have insurance to cover any theft by its employees. The condo complex has no employees, so they do not have the Freddie Mac required coverage. And Freddie Mac said no to approving the condo complex and the deal died.
Another example of the Catch-22 insanity of the marketplace is the website known as VRBO. This is short for Vacation Rentals By Owners. Fannie Mae rules say that if there is a nightly rental available by an owner the entire complex is ineligible for Fannie Mae financing. This eliminates almost all condo buildings in the High Country. Plus the rules are being updated what seems like daily.
All of this mayhem is caused by an overreaction by those in Washington and by the very small percent of property owners who may have the possibility of their home going into foreclosure. From the figures I have seen, less than 1 percent of all mortgage holders are having difficulty in making their payments, so they have caused a backlash to the remaining good and well-qualified buyers and mortgage holders.
Now with all this said, I am not stating that there are no mortgages available. As a buyer you need to get with your mortgage professional before you spend time looking at any real estate. By meeting with them you can lay out your plan and see if it has the possibility of being approved by an underwriter. And, if it appears to be approvable today, it hopefully will still be approvable next week and next month.
Planning ahead will save you time and most likely money when you do find that perfect piece of property, whether it's a single-family home, townhome or condo. Make that call to your mortgage professional today.
For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at firstname.lastname@example.org. Bob is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.