Selling Guide

Published August 29, 2017

Overview

PERS is a review method available to lenders to submit new, newly converted, and established projects to Fannie Mae to determine eligibility. Some projects must be submitted to PERS while a PERS submission is optional for other projects, as shown in the following table:

Standard PERS Process Streamlined PERS Process
Required for:
  • new and newly converted condo projects consisting of attached units located in Florida;

  • newly converted non-gut rehabilitation attached units in condo or co-op projects that contain more than four residential units; and

Optional for:

  • all other new or newly converted condo projects, not listed above

Optional for:
  • established condo projects that do not consist of manufactured homes

Standard PERS Submission Process

The standard PERS submission process is as follows:

Step Action
1. The lender performs a basic review to determine if the project satisfies all applicable Fannie Mae project eligibility and underwriting requirements prior to submission to PERS.

Note: For additional lender pre-PERS submission review requirements

2.

The lender completes a project submission package, which includes:

  • Project Eligibility Review Service Document Checklist (Form 1030), and

  • Application for Project Approval (Form 1026).

See below for additional forms that may be required.

3. The condo project's legal documents must comply with the Fannie Mae's requirements listed in B4-2.2-03, Full Review: Additional Eligibility Requirements for Attached Units in New and Newly Converted Condo Projects.
  • A qualified attorney engaged by the lender must review the condo project legal documents and determine that the documents are in compliance with Fannie Mae's requirements.

  • This determination must be documented by the attorney in writing but need not rise to the level of a formal, written legal opinion. The attorney may be the same person who prepared the legal documents or an attorney employed by the lender, but he or she cannot be an employee, principal, or officer of the developer or sponsor of the project.

  • The lender must complete the Warranty of Condominium Project Legal Documents(Form 1054) and attach the attorney review as part of the PERS submission process.

4. The lender submits the complete project package, including all relevant supporting documentation, via email using the PERS Project Submission mailbox. See E-1-03, List of Contacts.
5. A member of the Project Standards team reviews the package to determine if the project is eligible for approval.
6. Upon completion of the review, Fannie Mae issues its decision to the lender via email and posts approved projects on its website. See Condo, Co-op, and Planned Unit Development (PUD) Eligibility for approved projects listed for each state, the District of Columbia, and the U.S. Virgin Islands.
7. Fannie Mae informs the lender of the specific review fee assessed for each PERS submission. Lenders are billed for PERS review fees in their “Monthly Technology Invoice.” For fees, see the Project Eligibility Review Service (PERS) Overview on Fannie Mae's website.

Required Forms for Standard PERS Submission

The forms shown below are required for a standard PERS submission.

Form Title Description
1026 Application for Project Approval Requires certification that the lender has “underwritten” the project; includes non-residential space, common areas, sales plan, construction warranty, budget, builder/developer information, status of construction, environmental issues, resale restrictions, phasing, project management.
1029 Warranty of Project Presales Requires lender certification of sales and presales information.
1030 Project Eligibility Review Service Document Checklist Checklist confirming all required documents have been provided (see below).
1051 Project Development/Master Association Plan Requires lender certification of submitted information; includes master association and sub-association description and structure, common areas, title policy, master association budget, “as-built” survey or master plan.
1054 Warranty of Condominium Project Legal Documents Requires lender certification of compliance with laws and Fannie Mae legal requirements.
1071 Statement of Insurance and Fidelity Coverage Requires lender certification of all insurance requirements; addresses specific insurance types and clauses, and requires the lender to obtain and review all policies.
1073 Individual Condominium Unit Appraisal Individual condominium appraisal report.
1073A Analysis of Annual Income and Expenses – Operating Budget Requires lender certification that the operating budget has been analyzed; detailed operating budget information to be completed by HOA and lender.
1081 Final Certification of Substantial Project Completion Lender certification that project is substantially complete; lender to document any exceptions or uncompleted.

The Project Eligibility Review Service Document Checklist (Form 1030) also requires that the lender submit the following project documentation to Fannie Mae with the PERS application.

Project Documentation Required by Form 1030
Prospectus, Public Offering Statement, or equivalent document
Sample contract of sale
Sample unit appraisal
Phase 1 and/or Phase 2 Environmental Hazard Assessment (if underwriting analysis indicates any environmental concerns)
Development plan, including marketing materials, unit floor plans, and pricing analysis
Engineer’s survey/property condition assessment with reserve analysis and developer’s Schedule of Improvements (if the project is a conversion)
Recorded plat map/site plan
Budget prepared for the project
Sales strategy from developer
Letter from construction lender indicating loan is in good standing
Photographs of subject project (include the site, improvements, recreation facilities, parking, and amenities) and comparable projects

Fannie Mae reserves the right to request additional documentation it deems necessary to conduct a full review of the project.

Additional Requirements—For Newly Converted Non-Gut Rehabilitation Condo or Co-op Projects

A non-gut rehabilitation refers to the renovation of a property that does not involve structural or functional changes, such as the replacement of all HVAC and electrical components. Rather, the rehabilitation might include, for example, the replacement of appliances and carpeting.

In order for a newly converted non-gut rehabilitation condo or co-op project to receive project approval through the standard PERS process, the project must comply with the following requirements.

Lender Pre-PERS Submission Review Requirements –

For Newly Converted Non-Gut Rehabilitation Condo or Co-op Projects

The project cannot be an ineligible project in accordance with B4-2.1-02, Ineligible Projects.

For condo projects—The condo project must comply with all requirements of the Full Review (as provided in B4-2.2-02, Full Review Process and B4-2.2-03, Full Review: Additional Eligibility Requirements for Attached Units in New and Newly Converted Condo Projects).

For co-op projects—The co-op project must comply with all requirements for co-op projects (as provided in B4-2.3-02, Co-op Project Eligibility, B4-2.3-03, Legal Requirements for Co-op Projects, and B4-2.3-05, Geographic-Specific Co-op Project Considerations).

All rehabilitation work involved in the condo or co-op conversion must have been completed in a professional manner.
A current reserve study prepared by a qualified, independent professional company, accompanied by an engineer's report, or functional equivalent, must comment favorably on the structural integrity of the project and the remaining useful life of the major project components.
The project budget must contain line items for
  • reserves to adequately support the costs identified in the reserve study, and

  • a utility contingency of at least 10% of the previous year's utility costs if the utilities are not separately metered.

Funds to cover the total cost of any items identified in the reserve study or engineer's report that need to be replaced within five years from the date of the study must be deposited in the reserve account of the HOA or of the co-op corporation, in addition to the amount stated immediately above.
The developer must provide a detailed description of the work proposed or already completed in order for the project units to be ready for sale.
Generally, at least 50% of the total condo units or co-op stocks or shares in the project or subject legal phase must have been conveyed or be under contract for purchase to principal residence or second home purchasers.
Up to 30% of the units (or of stocks or shares for co-ops) in projects that are subject to rent regulations, which protect tenants from eviction (if they have chosen not to purchase their unit), will be permitted.
Phasing of projects (single building or multiple buildings) will be considered on a project basis.
The project sponsor or developer must provide a comprehensive sales and marketing strategy.
All projects are subject to a site inspection.

Note: See B4-1.3-08, Comparable Sales, for information about appraisals of units in newly converted condo projects.

Streamlined PERS Submission Process—For Established Projects

The streamlined PERS submission process for established condo projects that do not consist of manufactured homes is as follows:

Step Action
1. The lender performs a basic review to determine if the project satisfies all applicable Fannie Mae project eligibility and underwriting requirements prior to submission to PERS.
2. The lender completes a project submission package, which includes:
  • Application for Approval of Established Project (Form 1091).

  • Condominium Project Questionnaire—Full Form (Form 1076), or a substantially similar form, completed within the past 180 days.

  • An appraisal report for a representative unit in the project. This report must be prepared within 120 days of the PERS application, and include photographs of the project, private streets, recreational amenities, parking, commercial space, and common areas.

  • Current fiscal year’s approved operating budget that reflects homeowners’ association income and expenses.

  • Reserve study completed within the past 24 months (only required for projects that are not funding a minimum of a 10% dedicated expense allocation in the budget to a replacement reserve for the future repair/replacement of the project’s major components).

3. The lender submits the complete project package, including all relevant supporting documentation, via email using the PERS Project Submission mailbox. See E-1-03, List of Contacts.
4. A member of the Project Standards team reviews the package to determine if the project is eligible for approval.
5. Upon completion of the review, Fannie Mae issues its decision to the lender via email and posts approved projects on its website. See Condo, Co-op, and Planned Unit Development (PUD) Eligibility for approved projects listed for each state, the District of Columbia, and the U.S. Virgin Islands.
6. Fannie Mae informs the lender of the specific review fee assessed for each PERS submission. Lenders are billed for PERS review fees in their “Monthly Technology Invoice.” For fees, see the Project Eligibility Review Service (PERS) Overview on Fannie Mae's website.

Fannie Mae reserves the right to request additional documentation it deems necessary to conduct a full review of the project.

Approval Designations

For both standard and streamlined PERS submissions, lenders must submit complete project packages to Fannie Mae via email to PERS Project Submission (see E-1-03, List of Contacts). Upon completion of its review, Fannie Mae will issue one of the following project approval designations:

  • Conditional Project Approval,

  • Final Project Approval,

  • Ineligible, or

  • Suspension of the Application.

Mortgages secured by units in projects must have a valid Fannie Mae Final Project Approval prior to delivery. Mortgages may not be delivered under the Conditional Project Approval, Ineligible, or Suspension of the Application designations.

Availability of Project Information

Lenders submitting projects to PERS must ensure that the developer, builder, management company, and/or HOA will provide project information to Fannie Mae as and when requested without charge. In the event the requested information is not provided, Fannie Mae reserves the right to withdraw the PERS approval.

Decision Expiration Dates

Conditional Project Approval: expires 9 months from the date of issue.

Final Project Approval: expires 18 months from the date of issue.

Note: Fannie Mae, in some instances and in its sole discretion, may set a shorter or longer expiration term.

For information on requesting an extension, see the Project Eligibility Review Service (PERS) Overview on Fannie Mae's website.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2017-04 April 25, 2017
Announcement SEL-2016–04 May 31, 2016
Announcement SEL-2015–12 November 3, 2015
Announcement SEL-2014–13 November 10, 2014
Announcement SEL-2012–06 June 26, 2012
Announcement SEL-2012–04 May 15, 2012
Announcement SEL-2010–16 December 01, 2010
Announcement SEL-2010–06 April 30, 2010
Announcement 08-34 December 16, 2008