New Rules for Co-ops and Condos New Fannie Mae Guidlines Warrant Attention

 In the last two years, Fannie Mae has amended it’s guidelines for selling and serving mortgages on condominiums, cooperatives,  and planned unit developments three times. Why should service providers,  cooperative corporations and community association managers care about what the  mortgage giant does?  

 Today, 70 percent of all mortgages are sold on the secondary market. Fannie Mae, and its sister, Freddie Mac, control roughly 90 percent of that  market. In short, if there are to be buyers of condominiums and co-ops, they need to be  able to satisfy Fannie Mae requirements. And without the ability to buy and  sell units freely, we can readily imagine the impact on property values. In  fact, we are seeing it already to a limited degree.  

 The History of Fannie Mae

 How did this come to be? Fannie Mae was created as part of the New Deal in the 1930s to purchase Federal  Housing Administration (FHA) loans. Banks had stopped lending for housing (sound familiar?) and this was a way to  bring low-cost money back into the market. Fannie Mae became a private company in 1968. Capital was raised to buy mortgages and resell them as mortgage-backed  securities.  

 This has traditionally been referred to as the secondary market. It exists to ensure a ready supply of mortgage capital to the market. Although some banks, and small savings and loans in particular, still retain  mortgages in their own portfolio, most mortgages are sold to the secondary  market.  

 Further, most loan originators would like to keep that option open—that is, to sell the mortgages in the future, even if they don’t do it now. That is why Fannie Mae underwriting guidelines have become the de facto standard  throughout the mortgage industry.  

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13 Comments

  • What is one supose to do, if they own a co-op in a less than five unit building?
  • Coops with less than 5 units are not necessarily a problem getting financed in NYC. I have been getting them financed for 28 years. FNMA will buy them.
  • For how long an owner/occupant must live in the conod before he can sell it or rent it out; in case of immergency, where he/she really needed to sell and/or rent the condo, fo rhow long does he/she need to live in in? thank you. Are ther a spcial circumstances where he/she can eother rent or sell the condo relatively short time after he/she purchases the bank/GSE condo or home? Thank you.
  • thinking of buying a co op on Friday, July 13, 2012 5:25 PM
    is there a fannie mae regulation that restricts banks from lending if one share holder owns more than 10% of the shares (or apts) and rents them rather than lives in them ?
  • Richard J Russell Richland Equity Resources on Saturday, September 29, 2012 9:28 AM
    Yes, this 10% reserve fund requirement is now required and has been since DoddFrank was implimented in July 2011 It is called a 'reserve fund' and represents 10% of the annual common charges or maintanence collected for all condominiums and cooperatives and must be noted on the Annual Budget as, 'Reserve Fund', independent of any assessment or special assessment that may be imposed for work needed
  • csilango@optonline.net on Tuesday, October 09, 2012 9:30 PM
    does the 10% requirement only in budget? are the boards required to physically put the funds into the reserve bank account? Or can they allocate it?
  • Due to new Fannie Mae guidelines for the lenders coops flip taxes can not exceed 5% of the selling price. How is that connected with getting moprgage? Flip taxes are paid by sellers.
  • What about a seller who owns adjacent co-op units who decided to "combine" them (i.e. take down a wall to increase the overall living space), who had the approval of the Co-Op board but maintained 2 share certificates and proprietary leases. In order for the interested buyer to get financing, is there a regulation requiring the leases and shares to be combined?
  • Do coops have to have fidelity bonds?
  • I LIVE IN A 10 UNIT CONDO. ONE OF OUR OWNERS OWNS 2 UNITS OR20% OF THE UNITS. SEVERAL OWNERS HAVE TRIED TO SELL THIR UNITS AND I TRIED TO REFI...ALL THE LENDERS OF POTENTIAL PURCHASERS RS AND MY REFI LENDER DENIED US BECAUSE OUR UNITS WERE "INELIGIBLE PROPERTY" IE COLLATERAL QUESTION: CAN THE 2-UNIT OWNER BE FORCED TO SELL TO A DISINTERESTED 3D PARTY?
  • We are in the process of purchasing a condo - is the HOA required to have fidelity insurance?
  • what a duplex split into two units? Our lender is saying that there has to be at least 10 units in the condo aasociation to refi.
  • has anyone heard of Fanny Mae refusing a co-op loan if the building has a commercial space lease to a parking garage...which has no litigations.