1. Primary Residences - These are considered to be the least risky. They are purchased to fulfill a need and most people will do everything in their power to make payments on these properties. Buyers get the lowest rates with the least amount of downpayment with these purchases.
2. Second Homes - More risky than primary homes but still considered fairly safe.
3. Investment Properties - Considerable Risks. Loan repayments are dependent on rent collected. If the owner experiences high vacancies, they may not be able to make their mortgage payment.
4. Condotels - Historically, these were small "hotel" style condominiums and considered very risky.

When it comes to condotels, Fannie Mae does not provide financing for them... at least not anymore. The fact is, Fannie Mae never did but recently they have cracked down on what is considered a condotel. During the boom almost any beach front condo in Florida qualified for Fannie Mae financing, but that's not the case anymore.

In fact, the situation has entirely reversed. In 2004 almost every condo qualified for financing. Today, almost none do. So basically, the value of condos are transitioning from a leverage based price to a cash based price.

Since only a small percentage of buyers have cash to pay for a condo, Prices are falling dramatically and will continue to do so unless someone steps in to provide buyers with financing options.

Over the past few years, we have experienced other financing difficulties with conventional loans, FHA loans,and Rural Housing Loans. In each case, Congress and the banks have stepped in with tax credits, lower interest rates, and incentives to relax lending requirements.

These actions have brought many buyers back into the market for homes but there is still one area left for them to address... Condo Financing. Congress will eventually step up and address this issue but in the meantime, seasoned, well-capitalized buyers are now coming back into the market.

They see the opportunity as short term and expect their condo investments to appreciate faster than the home market because of the spike in demand that will accompany relaxed condo lending in the future. Tim Shepard