On Oct. 13, Fannie Mae released new project requirements for condominiums and housing cooperatives following the partial collapse of Champlain Tower South condominium in Surfside, Fla., in late June. The requirements, which become effective Jan. 1, apply to loans secured by units in high-rise buildings containing five or more attached units.
Below are the main points to prepare community associations for the Fannie Mae’s new requirements and subsequent requests from lenders and appraisers.
Unsafe Conditions: Projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions will be ineligible until such repairs are made.
Significant Deferred Maintenance: Deficiencies that meet one or more of the following criteria will make projects ineligible:
- At least seven days of full or partial evacuation of the building is necessary to complete repairs.
- The project has damage, deficiencies, or defects severe enough to affect safety, soundness, or structural integrity; and/or substantial repairs and rehabilitation are required; and/or one or more of the building’s major structural or mechanical elements (such as the foundation, roof, load bearing structures, plumbing, electrical system, or HVAC) are impeded.
Special Assessments: All current or new special assessments will be reviewed for acceptability under the following criteria:
- Reason for the special assessment.
- Assessment amount and repayment terms.
- Demonstration of no negative impact to financial stability, viability, condition, or marketability.
Reserves Requirements: Ten percent budget reserves are required, regardless of reserve study assessments (and in addition to any special assessments that may be in place).
These requirements place a heavy focus on structural and financial stability. Documentation also is important, meaning all pertinent paperwork (appraisals, most recent six months of condo/co-op meeting minutes, financial statements, engineering reports, inspection reports, and reserve studies) must be carefully maintained and available to appraisers and lenders upon request.
You can see the full Fannie Mae requirements here: Lender Letter(LL-2021-14).
In addition to working with Fannie Mae on educating communities about the new requirements, CAI is engaging with management companies and attorneys to further advise our members on this issue. Your input on developing further guidance for condo and co-op boards is important and welcome. Please send us a message anytime to email@example.com.