Russ Martin of Perl Mortgage sent out a newsletter late Friday with an example of one lender's No Lend List - basically a list of condominium developments that they will not lend to. Although he was not at liberty to provide the bank's name he did indicate that it was "too big to fail". Here is the surprisingly long list:
Neither Russ nor I know the specifics of how these buildings got blackballed but in general these are the things that concern lenders:
- Too many renters - more than 30% (corrected from 20% on 12/15/10) of the units
- Lots of short sales and foreclosures
- Lots of delinquent assessments
- Budget issues - e.g. a large looming special assessment
- Lots of units for sale
- Liens against the building
- Part of the building is a hotel
- Not that many units have sold yet
- The developer is in trouble
It's interesting to note some of the names on the list, from which I can speculate as to why they are on the list - or not. Aqua is easy...the curse of the hotel. Haberdasher Square had a lot of work done recently so I assume they had a special assessment a while back. And The Regatta seems to have had a lot of rental activity. However, I was surprised to see Randolph Place on the list because we put a buyer in there not too long ago and there were no issues. Rentals were at about 20%, there aren't that many units for sale, and if I recall the budget was in good shape.
Russ' point in sending this out was that times are tough, banks are being very conservative, and we need to keep an eye on these lists. Furthermore, any development may be blackballed by one or more lenders but you can often find other lenders that will lend in that development. That's why you don't want to rely on a single lender when you go to buy a home. More on that another day.