Here are some key points to remember:
General:
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Prohibition on loans in projects with unfunded repairs: Both Fannie Mae and Freddie Mac prohibit the sale of loans secured by condominium units in projects with unfunded repairs exceeding $10,000 per unit.
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Improved clarity on critical repairs: Freddie Mac updated its Condo Project Advisor tool to better identify projects potentially needing critical repairs based on incomplete assessments.
For Established Projects:
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Streamlined review process: Existing projects with “Approved by Fannie Mae” status or “Full Review” with “Certified by Lender” designation in Fannie Mae’s Condo Project Manager can generally qualify without additional reviews.
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Waiver process available: For projects not meeting certain eligibility requirements, lenders can request a waiver from Fannie Mae based on the unit’s adequacy as collateral.
Providing a reserve study to the underwriting can answer these questions:
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Reserve study can substitute for 10% replacement reserve requirement: Lenders can use a reserve study instead of requiring a minimum annual budgeted replacement reserve allocation of 10% of the budget, under certain conditions.
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Acceptable study: The study must be prepared by an independent, qualified professional and meet specific criteria outlined by Fannie Mae and Freddie Mac. All studies from Pacific Crest meet or exceed these requirements.
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Must address key elements: The study should cover all major components of the common areas, their condition, remaining useful life, repair/replacement costs, funding requirements, and a suggested funding plan.
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Lender responsibility: Lenders must obtain, analyze, and retain the study and their analysis in the project approval file.
