Lending March 5, 2022

New Fannie Mae/Freddie Mac Condo Lending Rules

I want to bring to your attention the recent developments in condo lending. First of all, the information below is collected from lenders and others. I’m not a lending professional and might not be accurate in my description of the situation, so please conduct your own due diligence!


Because of the collapse of the Miami condo last year, Fannie Mae/Freddie Mac is now requiring building associations to assert whether there are any “Deferred Maintenance”. Therefore, if there are repairs that have been delayed (depending on how Fannie/Freddie defines it), the lender will need a 3rd party certification about the structural integrity of the condo, etc. However, I’ve heard that lenders are running into issues getting such answers from Management/Property Managers for fear of liability. I’ve also heard that one large local building management company is not willing to answer such questions and the buyer loan has been canceled as a result.


And not just “Deferred Maintenance”, the building will also not be eligible for Fannie Mae/Freddie Mac loans if it has what it considers to be critical repairs, structural repairs, and have health and safety issues.


In addition, due to the fire at Marco Polo building, Hawaii has a law for condos built prior to 1987 without fire sprinklers. Under the law, any of the affected buildings that does not have a fire suppression/sprinkler system will need to be retrofitted; or as a second option, have fire evaluation from an engineer, and an upgrade of the fire system as required by the evaluation. The deadline to comply is by the year 2025. Because of this, lenders are also reviewing building loan eligibility on a case by case basis, further adding uncertainty to the loan approval process.

Luckily, there is an option. Local banks have been offering what’s called Portfolio loan (mortgage provided by the bank itself and not subject to Fannie Mae/Freddie Mac rules, but usually at a higher interest rate, higher down payment as well as a higher FICO score criteria).


Therefore, if you’re thinking of purchasing a condo, or if you currently live in a condo and wants to do a refinance, please contact your loan officer for more info.


This content is presented for informational purposes only and the information is deemed reliable but accuracy not guaranteed. It is not my intention to provide any legal, financial, and business advice. For specific information, please consult a qualified advisor. Information are subject to change without notice.