The nations mortgage melt down is starting to batter Florida lenders. According to a new report from the Federal Deposit Insurance Corporation, problem loans are hitting dangerous levels. Loans 90-days delinquent now represent 1 percent of all Florida bank assets. One in four South Florida banks is at that threshold. The FDIC data shows big statewide bumps in non-current loans for construction lending, condo conversions and residential mortgages. Problem loans are at their highest levels since the mid-1990s. This is spurring some banks to tightening credit to companies selling housing supplies and others linked to the housing market.
Now the latest consumer casualties of the housing crisis seem to be buyers of expensive condos. That's because jumbo loans are becoming scarcer in this tightening credit market. Jumbos are loans larger than $417,000. Real estate experts say many South Florida buyers are feeling the effect of fewer lenders, higher interest rates, more conservative underwriting and less Wall Street investment in jumbos. Assuming a 10 percent down payment, a house or condo priced at $463,000 or higher typically requires a jumbo loan. Published data shows that nationally jumbo lending peaked at $650 billion in 2003 and dropped to $480 last year.
But at last a glimmer of light for condo buyers looking to get out of sales contracts. They might soon catch a legal break. A case now pending in the 4th District Court of Appeal in West Palm Beach stands to overturn a ruling by Palm Beach County Circuit Court Judge Jonathan Gerber, Gerber essentially ruled that buyers can't renege on sales contracts just because of spiking costs in new condo developments. The decision stems from a 2006 suit filed buyers of Swerdlow Group's Marina Grande in Riviera Beach. Dave Dixon and Tim Navarro sought to ditch a contract on a $495,000 unit. They argied that Marina Grande's growing insurance and utilities costs hiked their anticipated monthly expenses by $178.00. The duo sued citing a clause in state law that allows buyers to cancel if material changes to the original contract cause an adverse impact. The case is believed to be the first to test the definition of material and adverse impact in the current mortgage and housing crisis.