New Fannie, Freddie mortgage-approval rules require info on a condo building’s soundness. But few boards have easy access to data and often don’t understand it.
NEW YORK – Following the June collapse of the Surfside condo tower that killed 98 people, Fannie Mae and Freddie Mac started asking questions about the safety and soundness of condos and co-op buildings. Prior to that, the mortgage firms said they’d stop buying loans connected to buildings with significant deferred maintenance or safety issues.
Anything that makes it more difficult to get a condo mortgage can hurt buyers who need a loan, and confusion on the part of both buyers and lenders seems to be having an impact.
Banks planning to sell their loans to Fannie or Freddie have been given new in-depth questionnaires about a building’s condition to be completed by condo management companies, associations or boards. However, many of those groups aren’t sure how to answer all the questions. Some have said that some of the questions don’t even apply to their buildings.
Lenders that hope to sell mortgages to Fannie Mae and Freddie Mac, however, want detailed answers so they don’t get stuck holding too many loans on their books.
“It’s somewhat difficult to answer unless you’re a structural engineer,” says Kevin Hirzel of Hirzel Law PLC, which represents condo associations in Michigan and Illinois. “If you’re just a volunteer board member or property manager, you’re not going to know by looking at the building that it could have a significant issue.”
The confusion is slowing down loan approvals and could make it more difficult for condo and co-op buyers to get mortgages.
A Federal Housing Finance Agency (FHFA) spokesperson said the agency “will work with Fannie Mae and Freddie Mac to minimize industry disruptions related to the questionnaires so that condominium associations, lenders and other stakeholders more clearly understand the requirements.”
The questionnaire is optional, but condo representatives need to find a way to make assurances that the building is in good condition – but they contend that there’s little clarity about how much alternative information Fannie Mae and Freddie Mac will accept.
Wall Street Journal (02/20/22) Eisen, Ben; Friedman, Nicole
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