Update may sink condo financing
A nightmare scenario looms for condo buyers applying for certain types of federally backed mortgages.
If you are selling or are looking to buy an attached condominium in a community with five or more attached units, conventional financing from mortgage giants Fannie Mae and Freddie Mac may soon become elusive.
Beginning Jan. 1 for Fannie and starting Feb. 28 for Freddie, the mortgage giants are putting the screws to a required HOA questionnaire. New questions ask applicants about the structural integrity of the community and whether any code violations are anticipated.
No doubt, Fannie and Freddie’s updated lender mandates are in response to the Florida condo tower that killed 98 people last June 24. Years of deferred maintenance at the Champlain Towers in Surfside caused the 12-story building to collapse.
Answering the agencies thoroughly and completely could force lenders to decline a mortgage application. (Remember: Mortgage lenders fund a loan, and then may sell it to Fannie or Freddie).
“Yes, lenders are declining projects even for a simple special assessment for repairs now. Things are just trickling in right now because the guidance started Jan. 1,” said one condo project approval expert, who asked to remain unnamed because he’s not the media spokesman for his company. “Soon enough we’ll see the effects hit all the condo market. I’ve only seen it affect projects with major issues at this point; meaning (the project) has code violations and millions of dollars of repairs underway.”
Answering these questions honestly or possibly with a guess could bring liability in the form of future lawsuits against HOA stakeholders such as the property management company, board members, inspectors, engineers and the association.