Lending and secondary-mortgage-market officials are taking more cautious attitudes toward condominium loans as a result of continuing high foreclosure rates.

"In the past few years, the number of condominium loans that have gone into foreclosure has been all out of proportion," said William R. Thomas, executive vice president of the Federal Home Loan Mortgage Corp. (Freddie Mac), a major purchaser of residential mortgages in the secondary market. "The ratio is about 2 1/2 to 1" over that for detached homes. At the end of last year, 0.20 percent of Freddie Mac's loans for all types of housing were in foreclosure.

"Condo loans are not as well accepted as they were a year to 18 months ago," according to Dall Bennewitz, a vice president and the director of mortgage lending at the U.S. League of Savings Institutions. "In some areas, lenders won't make them at all. Others have toughened up their standards. Others have stopped making certain types of condo loans."

Freddie Mac, which pools and packages mortgages into securities that it sells, now inspects "every new condo project" and has "turned down a significant number of projects," Thomas said. However, he said Freddie Mac relies on the judgment of lenders when it comes to mortgages on existing condo units.

"But we're floating this caveat to lenders: 'Take a careful look at the condo loans you make,' " he said.

Freddie Mac closely scrutinizes at least half the condo loans in the pools of mortgages it buys, according to Karen Eissner, Freddie Mac's director of quality control.

Eissner, Thomas, Bennewitz and officials from two other trade associations, the Mortgage Bankers Association of America and the Mortgage Insurance Companies of America, said they find that the greatest risks are with second-home condominiums; with loans that in the past have been made with only 5 percent down payments; and with units in smaller buildings, in economically depressed areas such as Houston and in suburban areas with nearby open spaces where more condominium developments can be built.

In most cases, higher down payments are required on condos than on comparable single-family detached homes, according to the U.S. League's Bennewitz. "I would doubt if any 95 percent loans are still available on condos," he said.

Loans on second-home condos in places such as Florida and ski resorts and on condos bought as investments in places "such as in Hawaii where they go into rental pools" are "tough to be approved any place," Bennewitz said.

Brian Chappelle, a senior director of residential finance with the mortgage bankers group, said that accurate appraisals and larger down payments are more important for condo loans than for single-family loans because of a lower rate of appreciation on the condominiums.

"Condos appreciate quickly right after a development is sold out and then they level off," he said.

Chappelle suggested that, because of the detrimental impact investors have on condo values and loan availability, persons considering purchasing a new unit should ask the developer whether sales are being made to investors.

"Conversions [from rental apartments to for-sale condominiums] are risky because the developer may just do cosmetic work," he said, noting that, for this reason, the Federal Housing Administration will not approve loans on condos less than one year old.

Financing incentives such as mortgage buy-downs, which are offered to encourage purchases, can influence a lender to reject a condo-loan application, he said.

A suburban location also can make a condo loan risky for a lender when another builder is able to build a slightly better condominum development nearby that will deflate the value of the first development, according to Chappelle.

Thomas said that small condominium buildings are "more of a problem than large buildings" because investors who are more interested in cash flow than in building maintenance can so easily become dominant over owners who live in the building.

Finding the right owners to run a condo association smoothly and to keep control of costs and maintenance needs also can be a problem in smaller buildings and this then can have a negative effect on values, according to Bennewitz.

Today's low interest rates and accompanying strong market for single-family detached homes also is having a negative effect on condos, Thomas said.

Chappelle said, "A condo often is a place of last resort to get a home for a lot of people when interest rates are high. A lot of people in condos really want to live in a single-family house."

But this is not true for the city condominium owner who can afford a single-family home in the suburbs but chooses an in-city condo instead, Chappelle said.

Bennewitz said that "provisions of a condo agreement also can sometimes drive away lenders. "Some agreements have a prohibition against renting," he noted. "If a lender has to take a unit back, he may want to rent that thing."

Steven Doehler, executive vice president of the Mortgage Insurance Companies of America, said that it generally is easier to obtain a loan on a condo resale than on a new unit because a history of maintenance and other costs exists, the building probably is sold out and there is no worry as to whether a developer will put in all the promised amenities.

"Condos went through phases," Bennewitz concluded. "First of all, lenders didn't understand them and were reluctant to make loans. Then they started to make loans, found out they were pretty good and began to look upon all condo loans as the same.

"Then they found out that wasn't the case and started to get burned," the savings and loan industry official said. "Now they've gone back the other way and moved away from condos in general."