New Fannie Mae Condo Mortgage Requirements by Virna Brown of Greenpark Mortgage Corp.
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Today Fannie Mae just announced changes effective March 1 that will have a significant effect on:
New, non-gut rehab condominium conversions. This will not affect gut rehabs or affect established projects.
Here is a snippet on info:
Announcement SEL-2010-16 December 1, 2010
--Many buildings are converted to condominiums without the replacement of major components resulting in eventual increased costs to unit owners for maintenance and major repairs. In order to mitigate the additional risk that newly converted, non-gut rehabilitation projects pose, all newly converted, non-gut rehabilitation condo projects must be submitted to Project Eligibility Review Service (PERS) for review and approval.
Additional requirements have been added to the Selling Guide for non-gut rehabilitation projects that will, among other things, enhance the funding of reserves, help to minimize future potential financial hardships to unit owners, and help ensure a project’s longer term sustainability. These requirements include (but are not limited to):
*All projects are subject to a site inspection by Fannie Mae.
*A reserve study must be prepared by a qualified, independent professional company.
*The project budget must contain line items for reserves to adequately support the costs identified in the reserve study and a utility contingency of at least 10% of the previous year’s utility costs if the utilities are not separately metered.
*Funds to cover the total cost of any items identified in the reserve study or engineer’s report that need to be replaced within five years from the date of the reserve study must be deposited in the homeowners’ association reserve account, in addition to the amount of the utility contingency as stated above.
*The developer must provide a detailed description of proposed or completed work.
*Hotel or motel conversions (or conversions of other similar transient properties) are ineligible.
The changes described above for newly converted, non-gut rehabilitated projects and unit square footage are effective for loan applications dated on or after March 1, 2011
Effective in March, it is likely to expect you will be seeing more and more FHA loans for new conversion condos that are not gut rehabs.
Sr. Mortgage Consultant- License# 35630
Licensed in MA, RI, NH, CT
Greenpark Mortgage Corporation
140 Gould Street
Needham, MA 02494