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Fannie Mae, a dominant financing source for condominium projects, has rolled out new procedures that some lenders and mortgage brokers say could tighten up the availability of loans to condo purchasers in the coming months. Freddie Mac has issued similar new guidelines.
Under Fannie Mae's changes, most of the due-diligence research on condominium projects' key characteristics -- their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use, and percentage of units owned by investors -- must now be performed upfront by loan officers.
Not only is this time-consuming and costly, but under the new procedures, Fannie Mae expects the lender to warrant the accuracy of its research. Some condo project legal documents run into the hundreds of pages of text, yet lenders are supposed to take legal and financial responsibility for their accuracy.
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