Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac released updates on Wednesday related to condominium and co-operative project standards policies for properties in need of critical repairs and special assessments.
“At the direction of the FHFA, Fannie Mae and Freddie Mac have worked together to update project review requirements to assist lenders in identifying projects that may have issues that result in unsafe conditions, and to promote sustainable homeownership,” the update states. “Fannie Mae is updating its project standards policies to address projects in need of critical repairs, and projects that have material deficiencies (such as significant deferred maintenance) or special assessments.”
The new project review requirements include defining “critical repairs, material deficiencies, and significant deferred maintenance,” including routine repairs not considered critical; the prohibition of the sale of condo units or co-op shares in complexes that require either critical maintenance or are under evacuation orders due to unsafe conditions; and the creation of a required review of “all structural or mechanical inspection reports that have been completed within 3 years of the project review date.”
Fannie Mae’s guidance comes as an update to its Selling Guide in consultation with the Federal Housing Finance Agency (FHFA). The update will prohibit the sale of condo units or co-op shares in projects with unfunded repairs totaling more than $10,000 per unit.
Freddie Mac’s new guidance was issued as an update to its Condo Project Advisor, an informational platform with information about buildings.
“Currently, if a Project Assessment Request (PAR) submitted to Condo Project Advisor receives an ‘Incomplete Assessment’ feedback message, that’s an indication that the tool can’t assess the project,” the guidance states in part. “On July 29, 2023, we’ll make things easier for you by updating one of the ‘Incomplete Assessment’ messages to alert you that the project may need critical repairs. You can determine whether or not a project does indeed require repairs.”
All requirements go into effect on September 18.
This new guidance follows a letter issued in 2021 by Fannie Mae that created temporary requirements for condos and co-op projects after the partial collapse of condominium complex Champlain Towers South in Florida that claimed the lives of 98 people and injured 14 others.