Fannie Mae Releases New Requirements for Condos in 2022
Beginning January 1, 2022, Fannie Mae is taking a stronger look at condos after releasing requirements that target properties with “significant deferred maintenance and public repair directives related to unsafe conditions.”
On the new requirements, Jodi Horne, director of single-family collateral risk management at Fannie Mae has said, “...units in condo and co-op projects must document any special assessments or deferred maintenance that may impact the safety, soundness, structural integrity or habitability of a condo or co-op unit, or the overall project and its amenities.”
Fannie Mae’s Key Requirements for Condos in 2022
Unsafe Conditions: Condos that have received a directive to make repairs due to unsafe conditions will be ineligible until the repairs are made.
Significant Deferred Maintenance: Meeting one or more of the following criteria will make condos ineligible:
- At least seven days of full or partial evacuation of the building is necessary to complete the repairs.
- Maintenance issues are severe enough to affect safety, soundness, or structural integrity.
- Substantial repairs are required, meaning that one or more of the building’s major structural elements (foundation, roof, plumbing, electrical system, etc.) are compromised.
Special Assessments: All current or new special assessments will be reviewed under the following criteria:
- Reason for the special assessment
- Assessment amount and repayment terms
- Must be able to demonstrate no negative effect on financial stability or marketability
Reserves Requirements: Ten percent budget reserves are required, regardless of reserve study assessments . These reserves are required in addition to any special assessments that may already be in place.
A new Fannie Mae Questionnaire helps lenders to collect data from HOA or management company to determine condo eligibility.
Fannie Mae’s new requirements are meant to establish a stricter emphasis on appraisals, structural and financial stability.
How the New Requirements Affect Borrowers
Fannie Mae will no longer back mortgages for people trying to buy into a condo building with an Unsafe or Safe With a Repair and Maintenance Program (SWARMP) rating or designation.
Although these requirements have been announced as being temporary, it’s important to recognize that it’s a new process and it may take a little more time. Fannie Mae’s current condo requirements were created to ensure that you’re buying a property that’s safe. The complex must be vetted and approved- just like the borrower must be approved in the application process.
Borrowers should recognize a property that met Fannie Mae condominium requirements in 2021, may not be eligible going forward. Speak with your trusted mortgage professional to ensure that all requirements are being met.