New Fannie Guidelines for Condos & Co-ops
Fannie Mae’s new and stricter underwriting guidelines for condo and co-op financing could add some delays to the application process - and could impact a potential buyer’s ability to obtain a conventional loan for either a new or established condo or co-op if the building/project does not conform. Please note that many banks have their own guidelines. Therefore, the Fannie Mae guidelines may not apply to all condos and co-ops.
I. Lenders are now required to assume more responsibility for reviewing the finances of condo and co-op associations. Under the new guidelines, Fannie Mae requires that lenders perform full scale reviews of most condo and co-op loans (vs the “spot reviews” that lenders performed in the past).
These full-scale reviews will require lenders to review the condo or co-op association’s projected budget to verify the following four essential association budgetary items:
1. The association has an “adequate” budget.
2. The budget contains a line item allocating ten percent (10%) of annual revenues for the association’s reserves.
3. The association has available funds equaling the deductible under the association’s master insurance policy.
4. No more than 15 percent (15%) of the common area fees are delinquent by more than one month.
Note: Increased insurance costs have resulted in associations increasing their insurance deductible amounts to reduce annual premiums. Insurance deductibles can be quite substantial. Fannie Mae does not require a separate budget line item for insurance deductibles, but the potential cost of deductibles must be accounted for in the budget. Insurance deductibles may be included in the reserve fund or may be a separate item. In either case, the lender must determine that the project has the ability to fund insurance deductibles
II. Fidelity insurance issued in the name of the condo or co-op will be required for condos or co-ops with 20 or more units, ensuring that homeowner association funds are protected. The amount of fidelity coverage must be equal to three months of assessments/maintenance fees.
III. No more than 10% of a project can be owned by a single entity.
IV. No more than 20% of a project can consist of non-residential space.
Content Resource: Fannie Mae Single Family 2009 Selling Guide (Chapter B4-2, Project Standards)
Courtesy of:
Lisa Ryll
Tel: 212.745.9039
lryll@manhattanmortgage.com
Dan Levitan
Tel: 212.318.9422
dlevitan@manhattanmortgage.com
The Manhattan Mortgage Company
555 Madison Avenue, 14th Fl., New York, NY 10022
I. Lenders are now required to assume more responsibility for reviewing the finances of condo and co-op associations. Under the new guidelines, Fannie Mae requires that lenders perform full scale reviews of most condo and co-op loans (vs the “spot reviews” that lenders performed in the past).
These full-scale reviews will require lenders to review the condo or co-op association’s projected budget to verify the following four essential association budgetary items:
1. The association has an “adequate” budget.
2. The budget contains a line item allocating ten percent (10%) of annual revenues for the association’s reserves.
3. The association has available funds equaling the deductible under the association’s master insurance policy.
4. No more than 15 percent (15%) of the common area fees are delinquent by more than one month.
Note: Increased insurance costs have resulted in associations increasing their insurance deductible amounts to reduce annual premiums. Insurance deductibles can be quite substantial. Fannie Mae does not require a separate budget line item for insurance deductibles, but the potential cost of deductibles must be accounted for in the budget. Insurance deductibles may be included in the reserve fund or may be a separate item. In either case, the lender must determine that the project has the ability to fund insurance deductibles
II. Fidelity insurance issued in the name of the condo or co-op will be required for condos or co-ops with 20 or more units, ensuring that homeowner association funds are protected. The amount of fidelity coverage must be equal to three months of assessments/maintenance fees.
III. No more than 10% of a project can be owned by a single entity.
IV. No more than 20% of a project can consist of non-residential space.
Content Resource: Fannie Mae Single Family 2009 Selling Guide (Chapter B4-2, Project Standards)
Courtesy of:
Lisa Ryll
Tel: 212.745.9039
lryll@manhattanmortgage.com
Dan Levitan
Tel: 212.318.9422
dlevitan@manhattanmortgage.com
The Manhattan Mortgage Company
555 Madison Avenue, 14th Fl., New York, NY 10022
How do you feel about imposing a mortgage tax on co-ops as Gov. Paterson has proposed?
ReplyDeletewww.nycapartmentmarket.com
I'm opposed to it but I know the state needs revenue to balance it's budget so it will probably pass at some point. I think it will hurt many buyers particularly first time buyers who can't afford higher priced condos or the higher closing costs associated with condos. Since it is a mortgage recording tax, cash buyers, usually more affluent buyers are exempt.
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