California-based Provident Funding Associates LLC is getting out of the Florida condo lending business, it told broker partners on Friday.
In an email sent Friday morning, Provident said that it would “no longer be accepting new applications for condominiums” effective that day. Provident told broker partners that all loans in the pipeline must be locked by 11:59 p.m. PST on Oct. 31 or they’ll be declined. Additionally, all loans currently locked must be funded by the lock expiration date.
“We look forward to continuing to bring our partners our aggressive price and fast turn times for all other products we offer,” the company said in the email, which was reviewed by HousingWire.
Messages left with Provident were not immediately returned on Friday.
Provident, run by the Pica family, is known in the industry for its conservative approach and sports a better-than-average delinquency rate in its servicing portfolio, so it’s perhaps not a huge surprise it would exit such a choppy space.
“I’m not surprised. Condos are hard. Condos in Florida have to be next level,” said one retail lending executive. “We have an investor who won’t do any deals in Florida or near major bodies of water.”
A combination of soaring insurance rates and new regulations on condo association reserves and building maintenance work has created a surge in condo inventory in Florida. In particular it’s created a glut of 30-plus-year-old units on the market, with few takers.
According to Altos Research, the median list price for a condo in Miami-Dade County last week was $505,000, down from the peak of $620,000 on July 1, 2022. Inventory has also been surging — it was up to nearly 10,000 units last week, a sharp rise from about 6,300 a year ago.
Following the Surfside condo collapse in 2021 that killed 98 people, Florida lawmakers passed the Condo Safety Act, requiring condo associations to modernize buildings that had pushed off critical work for years.
The law also requires buildings to complete a structural integrity reserve study that will assess how much work needs to be done. Associates will then need to levy a special assessment on owners, which can run as high as six figures per owner at some buildings.
Some owners of older condo units have had to list at prices far below what they bought the units for because special assessments are so high (and are difficult to finance). Relatedly, Fannie Mae maintains a blacklisted a number of condo buildings in South Florida that it won’t back loans for.
One Florida mortgage broker said the Provident exit gave him “a feeling that we will see other major lenders exiting the condominium market in Florida. This could result in the local community banks and credit unions providing the financing, likely with maximum loan-to-value ratios of 80% or less.”
Some agents believe the condo market choppiness in Florida isn’t all bad news.
“The condos that may have been more financially responsible or proactive with repairs, those are the ones people really feel comfortable purchasing at a time when many feel like the risk might not be worth it,” Cyndee Haydon, a Seminole-based agent for Future Home Realty, told HousingWire in July. “I am anticipating that the biggest challenges in the future are going to lie with the older condo stock as many people already only want to look at newer complexes.”
Correction: Only Fannie Mae maintains a condo building blacklist; Freddie Mac requires lenders to underwrite condominium projects based on the Selling Guide requirements before selling the loan.
