April 26, 2010
Fannie Mae warms to BPC’s Liberty Luxe and Liberty Green
Grants ‘conditional approval’ to mortgage sales in Milford’s new condominiums
There’s a glimmer of good news for people whose attempts to buy or sell condos in Battery Park City have been frustrated by confusion among lenders over Federal National Mortgage Association (Fannie Mae) proscriptions. Fannie Mae buys mortgages from banks and bundles them into securities that are then sold to investors. The banks use the proceeds from these sales to make more mortgage loans, but can sell the original mortgages only when Fannie Mae agrees that they meet its guidelines. Fannie Mae has balked recently at backing mortgages secured by real estate subject to Battery Park City’s ground leases.
The most recent development is that Fannie Mae has granted “conditional approval” to the two newest condominiums in Battery Park City, Liberty Luxe and Liberty Green, now under construction on North End Avenue and expected to open in 2011. A spokesman for Fannie Mae explained that “‘conditional approval’ means that even if a building does not currently meet our requirements, we are satisfied that it will and have therefore notified lenders that we will purchase mortgages for apartments within that project.”
Concerning the larger problem of existing Battery Park City condos where lenders appear to have stopped making loans until they receive assurances from Fannie Mae that it will accept these mortgages as consistent with its guidelines, a source familiar with ongoing discussions between real estate companies, Fannie Mae and the Battery Park City Authority, says that “we’re very close to getting approvals for three more buildings – Liberty House, Liberty Terrace and Liberty Court.” This source says that Fannie Mae officials have already given informal, verbal approval about a number of technical issues (such as whether each building has a sufficient reserve fund) that were the last obstacles delaying official acceptance of each of these buildings. The final, written approval for these three is expected in the next several weeks.
Further progress on this issue, which should benefit all Battery Park City condos, has also recently been made in separate discussions that have focused on the ground leases each building has with the Battery Park City Authority. A source familiar with these discussions notes that Fannie Mae, assisted by an outside law firm that it retained for this purpose, is nearly finished reviewing all of the ground leases and is expected to issue soon a written declaration that they meet the agency’s guidelines. Once released, this letter will be made available to the managing agents and boards of each condo, and can be used by condo buyers or sellers to assure a prospective lender that a mortgage is eligible for sale to Fannie Mae. “Overall, they now appear to be satisfied with the leases,” this source explained. “We’re just waiting for the final sign-offs and then the problem should be resolved.”
– Matthew Fenton