Unit owners attempting to sell their apartments may find that prospective purchasers are encountering difficulty in obtaining a mortgage if their property is not approved by Fannie Mae. When these unit owners have difficulty selling their apartments, they often turn to their board, who then must obtain a crash course in Fannie Mae guidelines. These guidelines are published in Fannie Mae’s 1,200-page Selling Guide which is prepared for lenders, but which in some cases offers minimal consideration of the realities of the local markets.
It is important to understand that Fannie Mae and Freddie Mac purchases 90 percent of the end loans obtained by unit owners. Fannie Mae has become the benchmark for most properties and rules have been adopted for Jumbo Loans. Fannie Mae typically relies on the lenders to perform the reviews for co-ops and condos. If a project does not meet the guidelines, the lender can seek waivers of the guidelines if there are compensating factors.
Additionally, lenders were historically allowed to utilize a limited review program to have condominium properties approved. Fannie Mae regulations are adapting to the environment, and as a result utilizing the limited review has become more stringent.
It may seem that Fannie Mae is simply getting more serious about the rules, however, they are also requiring lending banks to repurchase loans that don’t meet the requirements shown in the Guide. As a result, lenders are following the Guide quite carefully.
Concerns and Caveats
There are concerns with the Guideas it is changed without any public consideration, without published proposals or news releases, and without a period for public comments. Updates appear on the website without any prior notice that changes are being considered.