T


he largest mortgage lenders in America recently updated their lending requirements for HOAs and COAs,


making the requirements for reserve funding and deferred maintenance repair much more strict. This could have a major impact on the resale value of units within common interest associations and should make Boards and homeowners alike closely examine how they fund reserve projects.


Lender to the Lenders


  Federal Home Loan Mortgage Corporation, or FMCC) are two major mortgage lenders in the United States. They are secondary lenders, which means that they buy loans from major banks that provide mortgage funding. They were both chartered by the US Congress to support the housing market and together hold between 60-70 percent of the mortgages in America depending on the year and the source.


Lenders have made the requirements for reserve funding and deferred maintenance repair much more strict.


Since FNMA and FMCC hold such a high percentage of total loans, their requirements trickle down to the primary lenders and big banks that fund the sales and  our management.


Temporary Standards Made Permanent


In July 2023, FNMA and FMCC released new requirements that made permanent the temporary standards put in place after the collapse of Champlain Towers in Florida. These changes are just some of the national changes to HOA- related laws made after the tragedy in Surfside, FL on June 24, 2021 that killed 98 people.


 investors to take a closer look at the physical condition of a property and critically evaluate how major repairs are being funded and completed. The lending guidelines became permanent on September 18, 2023.


Scrutinize the physical condition of a property and critically evaluate how major repairs are being completed.


Full Disclosure of Building Inspections


Lenders now require that all building inspections be disclosed, regardless of whether they revealed building  if one is completed it must be made available for review by the lender in the resale documentation. This includes any kind of building envelope, roof, plumbing, electrical, or other building element inspection.


One primary lender consulted for this article relayed   a Fannie Mae or Freddie Mac loan could be secured. Some examples of critical repairs, according to one lender, are repairs related to balconies, elevators, parking structures, load-bearing structures, stairwells, and electrical systems. The list also includes anything related to mold and water intrusion and any “advanced physical deterioration.” If  association’s attorney or inspector.


If an inspection revealed  would require full repair before a FNMA or FMCC loan could be secured.


The property insurance for the building must provide for full replacement value instead of cash value. Both lenders


Continued On Page 20  wscai.org 19


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