What Community Associations Should Know About Project Requirements
Fannie Mae’s new project requirements for condominiums and housing cooperatives took effect in 2022. The requirements apply to all loans for units in high-rise buildings with five or more attached units.
Under the new requirements, community associations must pay close attention to several factors that will make units ineligible for loans.
- Building projects that have received a directive from a regulatory authority or inspection agency to make repairs due unsafe conditions will be ineligible until such work is completed.
- Significant deferred maintenance, including deficiencies, damage, or defects that affect structural integrity safety or soundness
- Required substantial repairs or rehabilitation
- Impeded structural or mechanical elements, such as HVAC, electrical systems, load bearing structures, roof, foundation, or plumbing
- Repairs that require at least seven days of partial or full evacuation to complete
The new guidelines also require that all special assessments are reviewed for acceptability based on certain criteria:
- Amount and repayment terms
- Reason for the assessment
- Demonstration that there is no negative impact on marketability, condition, viability, or financial stability.
Regardless of study assessments, ten percent budget reserves are required. All pertinent paperwork should also be maintained and provided to lenders and appraisers when requested. This includes inspection and engineering reports, reserve studies, appraisals, and most recent six months of co-op/ condo meeting minutes.
The requirements place an emphasis on financial stability and proper upkeep/ maintenance of the property. Community association leaders should be aware of these procedures and how they may affect future transactions.
At Cavanaugh & Co, we work with community associations to help them make smart financial decisions. Contact us today to schedule an appointment.
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