Unable to refi condo unit b/c of sponsor rules. Workaround?

Question

Hi BP,

There's this condo unit in Manhattan, NYC that's having difficulty in a cash out refinance. Chase bank has denied the refi request due to the following reason (probably due to some Fannie rule):

"As I had communicated per our phone conversation the building cannot be approved due to the sponsor owning 35% of the units in the building at market rent."

Rather than visit a mortgage broker, is there a way to identify lenders or the type of lender who will be able to approve? (or if you know any specific lender, that'd work too). Attempts have also been made at a few local banks but it turns out these banks have their own bank-specific lending rules that do not allow the refi.

Thanks!

Christopher Phillips · Answer

This is a common problem. Had a similar problem in Mineola, NY recently. Chase said they wouldn't do a loan on a condo because one owner owned too many units in the building, most of which wen through Chase. Odd thing is that the owner of the condo wanted offers to go through Chase. Capital One said they wouldn't have a problem with it. So you have to shop around.

Wayne Brooks · Answer

You need a lender that loans on "non warrantable" condos.  This will not be a Fannie or FHA loan.

Christopher Phillips · Answer

@Tony C.

You can try Contour Mortgage or Citizens Bank. Possibly Residential home Financing.

They all do work out of NY area and can keep loans in house that won't fit very well with Fannie Mae guidelines. PM for contact info. It will certainly help point you in the right direction.

Tony C. · Answer

@Christopher Phillips @Brandon Cohen I took BP's advice and tried Capital One. However, they denied my application for the following reasons:

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1)      One entity owns more than 10% of the units in the project, which is unacceptable. The sponsor owns 16 out of 45 units, which is 35.56%.

2)      The budget that was provided does not allocate 10% of the total income to a reserve fund for capital improvements/deferred maintenance, which is unacceptable, currently it is at 0%. In addition, there is a deficit on the budget.

3)      Investor concentration exceeds 50%, which is unacceptable for investor units. Please note investment properties are not eligible. This request will also be declined because the transaction is for an investment unit.

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Besides going the mortgage broker route, what options do I have? I've also tried some of the popular NYC credit unions, however, they also follow Fannie guidelines.

Please let me know your recommendations or which lenders you can recommend, thanks!

Brandon Cohen · Answer

@Tony C. this will happen with most major banks.  However, capital one is making a big push in the nyc market so maybe they would take it on.  That, or you'll have to go to a mortgage broker.  I can send you the info of two guys I've used.  PM or email me.

Unable to refi condo unit b/c of sponsor rules. Workaround?

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