FNMA Temporary Requirements for Condos
Newrez LLC "Newrez" Approved Correspondent Clients: Newrez will align with Fannie Mae Lender Letter 2021-14 as it relates to condo projects containing attached units.
Significant Deferred Maintenance and Unsafe Conditions
- Units in condo projects with significant deferred maintenance or in projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions are not eligible. These projects will remain ineligible until the required repairs have been made and documented.
- Significant deferred maintenance include deficiencies that meet one or more of the following criteria
- Full or partial evacuation of the building to complete repairs is required for more than seven days or an unknown period of time
- The project has deficiencies , defects, substantial damage, or deferred maintenance that
- Is severe enough to affect the safety, soundness, structural integrity , or habitability of the improvements
- The improvements need substantial repairs and rehabilitation, including many major components or
- Impedes the safe and sound functioning of one or more of the building’s major structural or mechanical elements , including but not limited to the foundation, roof, load bearing structures, electrical system, HVAC, or plumbing
- Projects that have failed to obtain an acceptable certificate of occupancy or pass local regulatory inspections or recertifications are not eligible.
Special Assessments
- Current or planned special assessments even if paid in full must be reviewed to determine acceptability. Document the loan file with the following
- The reason for the special assessment
- The total amount assessed and repayment terms
- Documentation to support no negative impact to the financial stability, viability, condition, and marketability of the project and
- Borrower qualification with any outstanding special assessment payment
- Obtain financial documents confirming the association can fund repairs. If the special assessment is related to safety, soundness, structural integrity, or habitability, all related repairs must be fully completed or the project is not eligible.
- If Newrez or the appraiser is unable to determine that there is no adverse impact, the project is ineligible.
Condo Project Manager “Unavailable” Status -Effective Immediately
- Fannie Mae will change the status of projects in Condo Project Manager™ (CPM™) to “Unavailable” when they become aware of projects that do not meet these temporary requirements or that do not meet standard Selling Guide requirements for project eligibility.
- Regardless of the project review process used in underwriting, loans secured by units in any project with a CPM status of “Unavailable” are ineligible.
Reserve Requirements
- Condo projects must have 10% budget reserves. The flexibility that allows the use of a reserve study in lieu of the condo project used to meet the 10% budget reserve requirement is suspended.
Project Eligibility Waivers -Effective Immediately
- Project Eligibility Waivers (PEWs) will not be issued for the following:
- Significant deferred maintenance
- Failure to obtain a certificate of occupancy
- Failure to complete or pass regulatory inspections
- Projects subject to large special assessments
- All new PEWs for project insurance policy deficiencies are suspended.
Resources
Fannie Mae Lender Letter LL-2021-14