When performing a Full Review of new or newly converted condo projects, lenders must ensure compliance with the following additional requirements.
Note: Projects consisting of units in new or newly converted projects in Florida must be reviewed by Fannie Mae through the PERS process. See B4-2.2-04, Geographic-Specific Condo Project Considerations.
|✓||Full Review Requirements – For Units in Newly Converted Condo Projects|
|The project, or the subject legal
phase, must be “substantially complete” unless
other completion arrangements have been approved by Fannie Mae through
the PERS review process.
There may not be more than one legal phase per building.
“Substantially complete” means that
Note: Fannie Mae does not require the installation of typical buyer selection items such as appliances, floor coverings, counter tops, or light fixtures that are common and customary for the market, although buyer selections that involve the modification of a unit floor plan must be complete. Lenders are expected to obtain appropriate documentation to verify that all buyer selection items for the unit being financed are properly installed prior to closing.
|At least 50% of the total units in
the project or subject legal phase must have been conveyed or be
under contract for sale to principal residence or second home purchasers.
|Individual units in new condo projects must be available for immediate occupancy at the time of loan closing.|
If the project is part of a larger development, and the unit owners are required to pay monthly assessments of more than $50 to a separate master association for that development, lenders must review the overall development plan for the master association to evaluate the acceptability of the project.
|The overall development plan of the project
must be reviewed and the following must be acceptable:
|For projects (or the subject legal phase) that
are only substantially complete rather than 100% complete,
lenders must determine that acceptable completion assurance arrangements
that guarantee the future completion of all project facilities,
common elements, and limited common elements have been provided.
These assurance arrangements may include
Similar arrangements must be provided to support assurances against construction and structural defects. The assurances must
|The developer or sponsor should provide for and promote the unit owners’ early participation in the management of the project.|
|The project must meet the condo project legal document requirements in the following section.|
The table below provides Fannie Mae's requirements for the review of the condo project's legal documents for units in new and newly converted condo projects containing more than four residential units.
|Condo Project Legal Document Review Requirements - For Units in New or Newly Converted Condo Projects|
|Limitations on Ability to Sell/Right of First Refusal||
Any right of first refusal in the condo project documents will not adversely impact the rights of a mortgagee or its assignee to:
|Rights of Condo Mortgagees and Guarantors||
The project documents must give the mortgagee and guarantor of the mortgage on any unit in a condo project the right to timely written notice of:
|First Mortgagee’s Rights Confirmed||
No provision of the condo project documents gives a condo unit owner or any other party priority over any rights of the first mortgagee of the condo unit pursuant to its mortgage in the case of payment to the unit owner of insurance proceeds or condemnation awards for losses to or a taking of condo units and/or common elements.
|Amendments to Documents||
Required provisions related to amendments to project documents are as follow:
The table below provides references to the Announcements that have been issued that are related to this topic.