In January of 2009, FNMA made some changes in condominium declaration requirements, which each lender who applies for FNMA guarantees must adhere to. Fannie Mae required that lenders be aware of the entire ownership structure of a condominium development, including how many units were sold as part of the project, how many were rental property and how many were owned by one person. In addition, Fannie Mae also changed the reserve requirements that were necessary for the project owner to maintain the property, insurance requirements and also what condominium fees must be current. In some cases, these changes are to protect FNMA from potential defaulting on loans, while in other cases, the changes were made to protect individual condominium owners current and future.
What percentage of units does Fannie Mae require be sold?
For new condominium developments, Fannie Mae now requires that at least seventy (70) percent of units be sold. In addition, these units must all be eligible (that is 70% of the project) for FNMA financing. This restriction applies to new condominium developments as well as those which are converted. An additional requirement stated that not more than ten (10) percent of a project is allowed to be owned by a real estate investor (that is by one person or company).
What are the new insurance requirements?
Insurance requirements impact not only the existing owners of a condominium but also impact the insurance that is maintained by the condominium association. Insurance for each unit must comply with very strict guidelines that includes covering property damage for individual units. Property insurance is required to comply with HO-6 standards which include personal property, the physical property and unit structure past the frames of the property. Fannie Mae also requires that the association maintain a fidelity policy that allows the individual unit owners to be protected from fraudelent use of the association fees.
What are the requirements on Condominium Association Dues?
Previously, Fannie Mae allowed that up to fifteen percent (15%) of dues owed to the condominium association may be past due without creating an issue for new property owners. This meant that if total annual dues were $100,000, then up to $15,000 could be in arrears. However, the new statue provides that not more than fifteen percent (15%) of unit owners be past due. This may not appear to be significant, but in some situations it could prove to be very significant.