RESERVE FUNDING
FANNIE MAE AND FREDDIE MAC CONDOMINIUM LENDING POLICIES Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase and guarantee mortgages in the secondary market. Their condominium project eligibility standards are closely aligned and increasingly emphasize long-term financial sustainability, building safety, and insurance adequacy.
Recent policy changes introduce several important shifts:
• Elimination of the limited review process , resulting in more projects undergoing full review and increased documentation requirements. • Expanded use of full project reviews and lender questionnaires , increasing administrative responsibilities for associations and managers. • Removal of investor concentration limits , while placing greater emphasis on overall financial health and project stability. • Expanded eligibility for waiver of project review for smaller communities (up to 10 units), offering limited flexibility for certain projects.
In addition, long-standing requirements remain in effect:
• Projects with critical repairs or unsafe conditions are not eligible for lending until repairs are completed. • Critical repairs may include conditions affecting safety, structural integrity, or habitability, including those requiring partial or full evacuation. • Lenders must obtain documentation such as reserve studies, engineering reports, and inspec- tion findings to confirm project condition. • Special assessments are evaluated for purpose, amount, and repayment status, and may impact borrower eligibility. • Associations deemed noncompliant are classified as ineligible for mortgage financing until deficiencies are resolved. Both Fannie Mae and Freddie Mac require lenders to collect and review condominium question- naires (including Forms 1076 and/or 476) along with supporting documentation. FHA CONDOMINIUM LENDING POLICY The FHA insures mortgage loans for individual condominium units under Section 203(b) of the National Housing Act. To be eligible, a condominium project must:
• Be in full compliance with applicable state and local laws. • Be in good standing with relevant regulatory authorities. • Serve as primary residential use and contain at least two dwelling units.
FHA-insured condominium loans may be used to purchase or refinance units in approved projects such as low-rise, mid-rise, high-rise, and certain manufactured housing developments.
FHA condominium lending requirements are periodically reviewed and updated. Associations, managers, and reserve professionals should consult the FHA website for the most current guidance.
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