Many mortgage lenders were taken of surprise in October 2021 by the announcement that Fannie Mae will start requiring document review for condo and co-op projects (Lender Letter LL-2021-14) in light of aging infrastructure and significant deferred maintenance in the wake of the Champlain South Tower collapse in Florida.
These requirements come into effect January 1, 2022.
A raft of measures have been introduced:
- Significant deferred maintenance and unsafe conditions
- Special assessments
- Condo Project Manager “Unavailable” status
- Reserve requirements
- Project eligibility waivers
- Best practices and reminders
Critically, loans secured by units in condo and co-op projects with significant deferred maintenance or in projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions are not eligible for purchase. This includes:
- Full or partial evacuation for more than seven days or an unknown period;
- projects with significant defects, damage or deferred maintenance.
Lenders must also document any special assessment details, including:
- the reason for the special assessment;
- the total amount assessed and repayment terms;
- documentation to support no negative impact to the financial stability, viability, condition and marketability of the project; and
- borrower qualification with any outstanding special assessment payment.
Waivers will not be available and status of projects in Condo Project Manager will be “Unavailable” regardless of the project review process used.
Further, the lender should review the past six months of a project’s HOA meeting minutes and obtain information about any maintenance or construction that may have significant safety, soundness, structural integrity or habitability impacts on the unit or the project.
How do we comply with LL-2021-14?
To ensure compliance with Fannie Mae’s condo and co-op lending guidelines you either need a team of document review experts or to use tools designed specifically for this purpose.
Eli Report leverages artificial intelligence to “read” and extract important information from meeting minutes, reserve reports and other condo documentation to help satisfy LL-2021-14. Information is delivered either via an electronic report or via API.