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While Fannie Mae and Freddie Mac have developed lists of condo associations that are ineligible for participation in their mortgage programs, the challenge for associations begins with their inability to learn from the government-sponsored entities whether their communities are on the lists. In response to widespread calls to provide associations with access to the information on their current status, Freddie Mac recently provided association representatives with access to the data on whether their community has been deemed ineligible by the mortgage industry giant.
The latest figures indicated that Fannie Mae and Freddie Mac support approximately 70 percent of the mortgage market. After the horrific tragedy of the Champlain Towers South collapse in 2021, these financial institutions developed new lending guidelines for condominium communities. They each maintain their own separate requirements and lists of ineligible communities, and Fannie Mae has indicated it will provide condominium association representatives with access to their eligibility status during the third quarter of the year.
To determine the eligibility status for a community, an authorized representative such as a board member, property manager or attorney must complete the brief form on Freddie Mac’s website to request the information. If a property has been classified as ineligible for participation in the organization’s loan programs, it can then follow the process detailed on the website to initiate an appeal.
The form requires such basic information as the community’s legal name, mailing address, and the names of the association’s authorized representatives. For appeals of ineligible classifications, association representatives will need to provide documentation supporting the community’s compliance with all the project review requirements.
Fannie Mae and Freddie Mac were created by the U.S. Congress to provide liquidity, stability and affordability to the mortgage market. They provide liquidity to the thousands of banks and lenders that participate in home mortgages and financing by buying their loans and creating opportunities for investors. Lenders use the funds raised by selling mortgages to Fannie Mae and Freddie Mac to engage in further lending.
The increased transparency from the mortgage giants represents a major concession for condominium associations, as it enables them to identify and correct any potential inaccuracies and incomplete information that may have wrongly led to their designation. It also reinforces the importance of reserve studies and funding for predictable maintenance and repairs rather than relying on special assessments for temporary increases to unit owners’ payments.
Associations that land on these lists, which should be monitored regularly by their representatives, should focus their efforts on addressing and correcting the issues that led to their designation. These typically include inadequate reserves, structural/construction issues, insufficient insurance, too many renters, and outstanding delinquencies and special assessments.
Click here to access the form from Freddie Mac for associations to request their current eligibility status. Don’t forget to subscribe to our mailing list to receive updates on issues impacting community associations.