The condo hotel trend has been much ballyhooed, so why are lenders still sitting on the fence when it comes to consumer mortgage financing? Here are three simple reasons: 1.) The secondary markets (FNMA, FHLMC) have not seen enough condo hotel paper to grade the risks/rewards of this proportionately new asset class. 2.) Condo hotel is somewhere between a commercial hotel loan and a residential second home/investment property consumer mortgage, so they don't fit neatly into existing portfolios/guidelines. 3.) The yield/interest rate that a well-healed condo hotel purchaser is willing to pay on a 30-year mortgage is much lower than timeshare and other vacation ownership rates. Making this new yet-to-be determined risk hard to justify. Many of the new condo hotel offerings are even more difficult to mortgage at market interest rates and terms, because they are smaller than 600 square feet in size, do not have kitchens, include FF&E chattel in the sales price, and may be ...
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