Guidelines apply to all loans secured for condo and co-op projects containing attached units
LAGUNA HILLS, CA, November 11, 2021—Starting January 1, 2022, mortgage finance company Fannie Mae is instituting new temporary requirements for loans for condo and co-op projects. The company said these new requirements were developed in the wake of the collapse of the Champlain South Tower in Surfside, Florida and in response to concerns about projects with significant deferred maintenance.
Under the new requirements, condos that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions will not be eligible for purchase until the required repairs have been made and documented.
In its lender letter, Fannie Mae specifies the criteria for unsafe conditions including when full or partial evacuation of a building to complete repairs is required for more than seven days or an unknown period of time, and if damage or deferred maintenance is severe enough to affect the safety of the improvements, involves major components or impedes the safe functioning of one or more of the building’s major structural or mechanical elements.
It also stipulates that condos that fail to pass local regulatory inspections are ineligible for loans.
In addition, any current or planned special assessment will need to be reviewed to determine acceptability. Lenders will need to document the reason for the assessment, total amount, documentation to support no negative impact to the project, and borrower qualification for the special assessment payment.
Fannie Mae will no longer accept a reserve study in lieu of the condo project meeting its 10% budget reserve requirement and no waivers will be issued for not meeting any of the above criteria for loans.
In a blog post, Jodi Horne, Director, Single-Family Collateral Risk Management for Fannie Mae, said, “Adequate financial reserves are critical to funding the significant maintenance that supports ongoing viability of condo and co-op projects. To maintain homeownership sustainability, Fannie Mae has long required scrutiny of project reserves on loans delivered to us, as well as disclosure of any special assessments and review of a number of other important project characteristics that would impact mortgage borrowers. Our latest guidelines reinforce our project reserve requirements and focus on their importance.”
To read the full lender letter release on Oct. 13, 2021, click here.
HomeWiseDocs.com, a provider of online access to governing documents and project data for lenders, escrow and title companies, real estate agents and homeowners, said it’s reviewing Fannie Mae’s policy and updating its templates to comply with this new requirement.