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Fannie Mae declines my condo due to delinquencies in the neighborhood.Lending bank appeals, now what?

I've been under a contract for buying a foreclosure for about 6 months now. Today (9/25/2009) was the day I would have settled, however I find out 1 hour before settling time that Fannie Mae has declined my condo, according to my lending bank (Suntrust). After communicating with Fannie Mae, Suntrust tells me Fannie is afraid of investing in this property I want to buy because the homeowners in that neighborhood are not paying their mortgages and there are reported delinquencies in that neighborhood. Somehow, these delinquencies are affecting my ability to settle on this house. I separately called Fannie Mae directly via telephone and one of their level 1 representatives told me that they "back" the property I want to buy (i.e. they are willing to invest money in it) but they feel it's too risky because they think I am "unqualified" as a buyer. But this is all very conflicting because my loan was approved with Suntrust and their underwriters. In fact, my credit score is 700+. The Fannie level 1 representative said the reason is unknown why they think I'm unqualified and the only way I can find out is by talking to Fannie level-2 representative, who will get in touch with me in 1 week since they are super-busy people. So now Suntrust is in the process of appealing the decision recently made by Fannie Mae. Is anyone familiar with appeal process with Fannie? Does anyone have any suggestions for what I should do? Legal advice? All / any help from anyone out there will be much appreciated (realtors, lenders, sellers, etc..). By the way, the property is in Howard County, Maryland

Public Comments

1. they are right.. sorry to be so brutal. a borrower can be approved and a property declined.. many things happen in underwriting.. the 2 biggies are borrower approval and property approval.. you probably are not the problem.. they may try to blame you as to not violate RESPA law.. Red lining is illegal, they are Red lining the property to reduce future risk. they may not want you to know this.. my advice.. Run in the other direction.. i would not buy it. **wow.. Thanks Paul.. that's new for me, someone here agree's with me.. and hey i like the word Magic Box... hmm. no.. it's a Toolbox.
2. I kind of agree with Trixie and her magic box of B$. If Fannie Mae has a problem with the neighborhood, maybe it's not a good neighborhood to be buying in. And, maybe you should look elsewhere. Another option if you really want this property is to find another lender. You should go through a mortgage broker, though, instead of one lender. A broker gets daily rate sheets from various lenders and, when you apply through the broker, you're pretty much applying through all of the broker's lenders. Then, if one turns you down for whatever reason, you just go with another one (like one that doesn't do Fannie Mae loans). You can also apply to multiple lenders and go with the one who accepts you at the best terms.
3. Most condo's fail to get financing because they are below 70% owner-occupied. The lenders learned that condo's tend to depreciate when they become rented. At different times the limit has been 50% and 60%. Ask about that if you call again. What you are describing has been called "Declining Market" by the lenders. Prices are falling so fast in this area (near the condo) that the lenders can demand a higher down payment; but they usually will continue with the loan if you have the money. Blaming you for the "rejection" seems unfair. Almost like they think that will make you "go away". At some point you have to give up. An appeal to FNMA could take a year. I think you should cancel your sale and get your earnest money back while the condo is approved.