Effective this week, Fannie Mae and Freddie Mac backed loans will begin to require additional information as part of the condominium review process. At the direction of the Federal Housing FinanceAgency (FHFA), Fannie Mae and Freddie Mac have worked together to update project review requirements to assist lenders in identifying projects that may have issues that result in unsafe conditions, and to promote sustainable homeownership.

These agencies are updating project standards policies to address projects in need of critical repairs, and projects that have material deficiencies (such as significant deferred maintenance) or special assessments. These requirements apply to all loans secured by units in condo projects (condo loans) and all cooperative share loans secured by share ownership in a co-op project (co-op share loans) with five or more attached units, regardless of the project review type.

These project review requirements:

▪  define critical repairs, material deficiencies, and significant deferred maintenance, including defining routine repairs that are not considered critical;

▪  prohibit sale of condo loans and co-op share loans in projects in need of critical repairs;

▪  prohibit sale of condo loans and co-op share loans in projects with current evacuation orders due to unsafe conditions;

▪  require a review of all structural or mechanical inspection reports that have been completed within 3 years of the project review date;

▪  provide new requirements for condo or co-op projects with special assessments; and

▪  prohibit sale of condo loans and co-op share loans in projects with unfunded repairs totaling more than $10,000 per unit.

The new approval guidelines are focused around providing a structural and mechanical inspection to the lender if it was completed in the last three years, which in Maryland, is now a requirement for all condo associations and most homeowner associations with the implementation of a new law called HB107 requiring reserve studies by October 1 st of this year. Out of these inspections the repairs are broken down into maintenance items and critical items.

Jason Cook, Eastern Shore Manager of Waterstone Home Loans commented on some concerns surrounding the new requirements for our area, “The timing of this is what concerns me specifically in Ocean City being that this is coming on the heels of HB107 and all of those inspections are due in by October 1st.  We might have associations who have not completed their reserve studies, or who have identified repairs as critical by nature but the board may not have enough time to vote on the implementation of proper funding/assessments.”

Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.