New Requirements to Secure Fannie Mae and Freddie Mac Loans for Condos

New Requirements to Secure Fannie Mae and Freddie Mac Loans for Condos

To secure new mortgage loans backed by Fannie Mae and Freddie Mac, condominiums are now required to adhere to revised structural safety requirements. Following the Surfside, Florida condominium tower collapse in June  of 2021, the new guidelines were introduced in late 2021 to address concerns about aging infrastructure and deferred maintenance.

The new safety requirements address structural and financial stability. Community associations of condominiums and cooperatives that contain five or more attached units are now required to provide documentation to appraisers and lenders that include engineering reports, inspection reports, appraisals, financial statements, reserve studies, and the most recent six months of meeting minutes.

 Freddie Mac:

 The new requirements, which go into effect on February 28, 2022, include:

• Buildings in need of critical repairs are not eligible for Freddie Mac-backed loans.
• Freddie Mac will continue to allow new buildings with less than 10% in community association reserve funds to secure loans only if the most current reserve study is provided.
• Freddy Mac requires that at least 95% of budgeted special assessments have been collected.

 Fannie Mae:

The new requirements, which went into effect on January 1, 2022, include:

• Building projects with unsafe conditions that have received orders to conduct repairs from regulatory authorities or inspection agencies will be ineligible for Fannie Mae backed loans until the repairs are completed.
• Buildings with any of the following deficiencies will be ineligible for Fannie Mae backed loans:

1. Building repairs that will require all or some of the residents to evacuate the premises for at least 7 days.
2. Buildings with damage, deficiencies, or defects that affect the safety, soundness, or structural integrity of the building.
3. Buildings where substantial repairs and rehabilitation are required.
4. Buildings where one or more of the major structural or mechanical elements are impeded: the foundation, roof, load-bearing structures, plumbing, electrical system, and/or HVAC.

• Special assessments must be reviewed for acceptability based on the reason for the assessment, the amount of the assessment, the terms of the repayment, and the assurance that there is no negative impact to financial stability, viability, condition, or marketability. A 10 percent community association budget reserve is also required.

Call Burg Simpson’s Award-Winning Construction Defect Team Now

Burg Simpson is a national leader in construction defect litigation, fighting exclusively for the rights of homeowners and homeowner associations.

In 2021, Burg Simpson Eldredge Hersh & Jardine, P.C. was recognized by Best Law Firms® and U.S. News & World Report when they named Burg Simpson’s Construction Defect Department “Metropolitan Tier One,” the highest available ranking.

The award-winning attorneys that comprise Burg Simpson’s Construction Defect department have successfully represented condominium and townhome associations and the owners of single-family homes for over 25 years. With decades of experience, the Burg Simpson team has the far-reaching knowledge in all aspects of the construction industry and the expertise necessary to navigate this complex area of law.

Our construction defect lawyers begin each case by thoroughly evaluating the details of the matter and creating a sound legal strategy to obtain the best possible result. If you have a construction defect issue, our attorneys will vigorously advocate on your behalf and work to protect and enforce your legal rights.

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Statutes of limitation apply, so if you have a construction defect issue, do not wait to call the construction defect lawyers at Burg Simpson today.

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