New Fannie Mae Condominium Lending Guidelines

Last August I blogged that Fannie Mae was altering its lending practices in response to the sub-prime lending crisis. As the crisis deepened, the adverse impact upon the US economy and Fannie Mae only worsened. Since the government’s restructuring of Fannie Mae last fall, we have been awaiting revised lending guidelines for condominium properties. Those guidelines were just released in late December under Announcement 08-34.  The guidelines include the following revisions:

  • The 15% delinquency cap requires that no more than 15% of the total units may be more than 30 days delinquent;
  • There must be fidelity insurance if there are more than 20 units in the project;
  • Borrowers must obtain a “walls-in” coverage policy (commonly known as an HO-6 policy) unless the lender can document that the master policy of the Association provides the same interior unit coverage;
  • Master insurance policies covering multiple unrelated condominiums are no longer acceptable (if they ever were); and
  • The owner occupancy ratio of 51% includes REO owned units for sale as owner occupied units.

All of these changes take effect on March 1, 2009, except for the insurance provisions, which take effect immediately.

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