ORLANDO, Fla. – In the aftermath of the Surfside tragedy, Freddie Mac announced last week that it will begin inspecting condo developments' maintenance issues more closely before issuing individual loans. The adjustment comes after Fannie Mae made a similar declaration earlier this year. Over half of all loans in the United States are backed by these two mortgage behemoths.
The new rules are complicated – Freddie Mac announced them on its website – but they will generally deny condo and co-op unit loans if the building has deferred maintenance issues, special assessments to repair deferred issues, or other issues.
All of the adjustments mentioned in Freddie Mac's bulletin will be applicable for Mortgages with Settlement Dates on or after February 28, 2022, according to the bulletin. According to Fannie Mae's previous bulletin, the new regulations would apply to "whole loans purchased on or after January 1, 2022, and loans put into MBS pools having issuance dates on or after January 1, 2022."
Fannie Mae lenders will send condo managers a five-page form that must be entirely filled out as part of the procedure. It also provides instructions, such as "Do NOT enter 'contact agent.'" under the part that covers insurance types and amounts. Even if a condominium complex is otherwise exempt from review, the laws apply to all condominiums with five or more units.
While individual condo buyers may experience immediate difficulties in obtaining financing, the tougher restrictions may have a longer-term impact on entire condominium complexes. If the new paperwork isn't filled out correctly and returned immediately, even condo associations with no maintenance issues may find that unit owners – without the support of Fannie Mae and Freddie Mac – may have a difficult time selling their property.
Although these changes will be nationwide, Florida could feel a greater impact due to it's large number of condo buildings across the states.