FNMA/FHLMC Condo & PUD Definitions - Wintrustmortgage.net

FNMA/FHLMC Condo & PUD Definitions
FNMA/FHLMC Established Projects
90% or more of the total units in the project have been sold and closed to the unit
purchasers AND
Project is 100% complete AND
HOA control turned over to unit owners AND
No more than 15% of the total units in a project are 30 days or more past due on their
HOA AND
If subject property is owner-occupied or second home no maximum investor
concentration AND
WMC reserves the right to limit its overall concentration in any specific project.
No single entity can own more than 10% of all units AND
No more than 20% of the project can be commercial space AND
The project budget must be adequate AND
The project must have all applicable insurance coverage AND
Sellers must represent and warrant that the project complies with legal requirements
and compliance with state and local laws.
The condo warranty section on the 1008 must also be completed with the appropriate
Fannie Mae review type.
FNMA Project Classification and Warranty Codes
Eligible Condominium Types
Q – Limited Review* (Established project or Established 2-4 unit project)
S – CPM Expedited Review* (Established project or Established 2-4 unit project)
T – Fannie Mae PERS Unexpired 1028*
U – FHA Approved Project*
Eligible PUD Types
E – Established project*
T – Fannie Mae Unexpired 1028*
The underwriter must write the applicable warranty code on the 1008
* FHLMC acceptable.
FHLMC Project Classification and Warranty Codes
Eligible Condominium & PUD Types
Established Condo.
Established PUD.
All FNMA Project Classifications for Condo & PUD types listed above are acceptable.
Eligible Project Warranty Types
FNMA Limited Review (Q) or FHLMC Streamline Review: To be eligible under the
Limited Project Review, a project must meet all of the following eligibility criteria:
The project is not an ineligible project type as defined below.
The units, common areas, and facilities within the subject legal phase have been
completed per the appraisal.
The unit must be an owner occupied, primary residence.
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The maximum LTV/CLTV is dependent upon DU findings.
The unit may not be secured by a manufactured home.
Project is covered by required insurance.
Must be established project.
Attached Condo Unit – Established Projects
DU Approve Recommendations:
Occupancy:
LTV/CLTV:
Primary Residence 90%/90%
Second Home 75%/75%
Investment
Not Allowed
All other DU Recommendations including Expanded Approval Recommendations:
Occupancy:
LTV/CLTV:
Primary Residence 80%/80%
Second Home 75%/75%
Investment
Not Allowed
Documentation needed:
Completed HOA certification**
Appraisal
Master Certificate of Insurance*
Fannie Mae’s General Warranty of Project Eligibility***
Unexpired 1028 (T) (Fannie Mae Review) (see PERS section): Project acceptance
relates to any condo project that Fannie Mae reviewed and issued a project approval for
(form 1028). This list (Accepted Condominium Development List) is found on Fannie
Mae’s website (www.efanniemae.com). Proposed/New Construction Projects must be
approved by Fannie Mae as documented by an Unexpired Fannie Mae Form 1028. This
classification primarily applies to proposed or new projects that are still under
construction. It also applies to projects that do not meet the presale requirements for
Limited or Expedited Review.
Documentation needed:
Completed HOA certification**
Appraisal
Master Certificate of Insurance*
A copy of the Unexpired Fannie Mae 1028 & printout from
www.efanniemae.com – List of Accepted Projects showing the project acceptance
has not expired and must be provided in the file at the time of submission.
Fannie Mae’s General Warranty of Project Eligibility***
How to check the List of Accepted Projects:
Go to https://www.efanniemae.com/sf/refmaterials/approvedprojects/
Click on state
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Check state list for condo project
Print out List of Accepted Projects and add to loan file
FHA Approved Condo (U): A condo appearing on FHA’s approved condo list found on
HUD’s website (www.hud.gov) is permitted.
Documentation needed:
Completed HOA certification**
Appraisal
Master Certificate of Insurance*
Evidence of FHA approval (see blow)
Processor certification
Fannie Mae’s General Warranty of Project Eligibility***
A copy of the Condominium Detail screen showing FHA approval is required in the
file at time of approval.
Any Special Conditions or requirements in the Remarks must be met.
In addition to the approval, the file must also contain a certification from the
processor that the project is at least 70% owner occupied.
Lastly, the project must meet Fannie Mae’s insurance requirements* as well as
contain all required reps and warrants that the project meets Fannie Mae’s General
Warranty of Project Eligibility***.
How to check the List of Accepted Projects:
Go to https://entp.hud.gov/idapp/html/condlook.cfm or access through CPM.
Choose state from drop down.
Can filter by condo name, city or state.
Check list for condo project.
Print out Approved Condo List and add to loan file.
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Search for condo
project
Click on
underlined link to
display project
.
details
Status must show
approved
Any approval conditions
listed must be met.
Note: FHA has standard
condo conditions that
must be met that Fannie
Me requires for these
approvals as well (e.g.
70% owner-occupancy
requirement)
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CPM Expedited Review (S) (Established and all 2-4 unit projects): The Expedited
Review process (for Condos only) is followed when the transaction does not meet the
Limited Review, the project is not on the FHA Approved Project List or the Fannie Mae
Accepted Condominium Development List. Fannie Mae’s CPM (Condo Project
Manager) will be utilized by the underwriter to provide specific project acceptance for
attached and detached, established, and 2-4 unit condominium projects. Underwriters
will perform this function by searching for CPM for projects already entered and
accepted by CPM or by adding a project to determine acceptance,
Documentation needed:
Completed HOA certification**
Appraisal
Master Certificate of Insurance*
Current budget and legal documents
Fannie Mae’s General Warranty of Project Eligibility***
The following additional criteria will apply:
For established projects, no more than 15% of condo/association fee payments
can be more than one month delinquent.
The homeowners’ association (HOA) budget (actual for established) must be
reviewed for all projects (except 2-4 unit projects) to determine adequate funding
of replacement reserves for capital expenditures and deferred maintenance (at
least 10% of the budget) and provides adequate funding for insurance deductible
amounts.
Legal Documents meet Fannie Mae requirements as noted in section marked
Legal Requirements.
The project may not be comprised of manufactured homes.
*Insurance Requirements:
Liability Insurance
General liability of $1,000,000 per occurrence is required for all condos.
Borrowers are required to obtain a ‘walls-in’ Hazard Insurance coverage policy
(commonly know as HO-6) unless the lender can document the master insurance
policy of HOA covers the interior of the unit. The HO-6 policy must provide
coverage in the amount of at least 20% of the appraised value. The standard
requirement for a maximum 5% deductible also applies
o HO-6 “Walls In Insurance” must be escrowed.
Liability insurance is not required for properties located in a PUD.
The following are not permitted with respect to master or blanket project
insurance:
A blanket policy that covers multiple unaffiliated condominium associations or
projects, or;
A self-insurance arrangement whereby the owners’ association is self-insured or
has banded together with other unaffiliated associations to self insure all of the
general and limited common elements of the various associations.
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Fidelity Insurance
Evidence of fidelity insurance coverage is required for Type R condos that have 21 or
more units. Includes PERS, CPM expedited, Lender Full Review, FHA Approved and
Limited Review. There is no requirement for PUD projects or condominiums approved
under Type S and Limited Review project approval.
The fidelity insurance policy should cover the maximum funds that will be in custody of
the owners’ association or its management agent at any time, but no less than the sum of
three months of assessments on all units in the project.
Fidelity insurance is a type of insurance that a condominium obtains to protect itself
against economic loss from dishonest acts (claims that allege employee dishonesty,
embezzlement, forgery, robbery, computer fraud, wire transfer fraud, counterfeiting, and
other criminal acts) of anyone who either handles (or is responsible for) funds that the
association or corporation holds or administers, whether or not that individual receives
compensation for services.
**Legal Requirements:
Compliance with laws: project has been created and exists in full compliance with all
state law requirements where the project is located.
Limitations on ability to sell or Right of First Refusal: Any right of first refusal in the
condominium documents will not adversely impact the rights of a mortgagee or its
assignee to:
1. foreclose or take title to a unit pursuant to the remedies of the mortgage
2. accept a deed or assignment in lieu of foreclosure in the event of default by the
mortgagor
3. sell or lease a unit acquired by the mortgagee or its assignee
First mortgagee’s rights confirmed: No provision of the project documents gives unit
owners or any other party priority rights over the first mortgagee.
Unpaid dues: Any first mortgagee acquiring title to a unit through foreclosure will not
be liable for more than 6 months of the unit’s unpaid regularly budgeted dues accrued
before acquisition of title to the unit.
Attorney’s Opinion Letter: A qualified attorney engaged by the lender must issue a
written legal opinion based upon review of the project’s legal documents which states
they are in compliance with all legal requirements as required per Fannie Mae. The
attorney may be the same person who prepared the legal documents but he/she cannot be
an employee, principal or officer of the developer or sponsor of the project.
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***General Warranty
The lender represents and warrants that it reviewed the project to determine that it met
the required eligibility criteria within the three months that preceded the date of the note
and mortgage for that unit. The lender also warrants that it is not aware of any change in
circumstances since its review of the project that would result in the project not satisfying
out eligibility criteria.
Ineligible Project Types
Condominium hotels – any project that is managed and operated as a hotel or motel,
even though the units are owned individually. Projects with any of the following
characteristics to be hotel-type projects are ineligible:
Projects that include registration services and offer rentals of units on a
daily basis;
Projects with names that include the words “hotel” or “motel”;
Projects that restrict the owner’s ability to occupy the unit; and
Projects with mandatory rental pooling agreements that require the unit
owners to either rent their units or to give a management firm control over
the occupancy of the units. These formal agreements between the
developer, HOA, and/or the individual unit owners, obligate the unit
owner to rent the property on a seasonal, monthly, weekly, or daily basis.
In man cases, the agreements include blackout dates, continuous
occupancy limitations, and other such use restrictions; In return, the unit
owner receives a share of the revenue generated from the rental of the unit.
Projects with non-incidental business operations owned or operated by the owners’
association such as, but not limited to, a restaurant, spa, health club, etc.
Investment securities – projects that have documents on file with Securities and
Exchange Commission, or projects where unit ownership is characterized or
promoted as an opportunity.
Common interest apartments or community apartment projects - any project or
building that is owned by several owners as tenants-in-common or by a HOA in
which individuals have an undivided interest in a residential apartment building and
land, and have the right of exclusive occupancy of a specific apartment in the
building.
Timeshare or segmented ownership projects.
Houseboat projects.
Multi-dwellings unit condominiums – projects that permit an owner to hold title (or
stock ownership and the accompanying occupancy rights)to more than one dwelling
unit, with ownership of all of his or her owned units (or shares) evidenced by a single
deed and financed by a single mortgage (or share loan).
Condominium projects that represent a legal, but non-conforming, use of the land, if
zoning regulations prohibit rebuilding the improvements to current density in the
event of their partial or full destruction.
Any project for which the owner’s association is named as a party to current
litigations or, for any project that has not been turned over to association, for which
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the project sponsor or developer is named as a party to current litigation that relates to
the project.
Project consisting of more than 20% commercial space.
Cannot close or deliver for purchase more than 30% of the units in project.
New construction where HOA is not in control.
Owner-occupancy ratio calculation is updated to clarify that Real Estate Owned
(REO) units for sale are treated as owner-occupied units.
New condominium projects in which the property seller offers sales/financing
structures in excess of the maximum allowable contributions for individual loans.
FNMA PERS
FNMA Project Eligibility Review Services
Fannie Mae is reintroducing its condominium project review function under the name of
Project Eligibility Review Service (PERS). Must be classified as Type (T) - Fannie Mae
Review. Effective 01/15/09, all Florida condo projects that do not meet the "Established
Project" guidelines must be submitted to PERS for approval; PERS is an optional service
for other states and projects. There is a fee charged in connection with this review. The
project must be on Fannie Mae's PERS approved list located on www.eFannieMae.com
and the approval type must be indicated as "Final Project Approval", prior to loan
closing. If the project was not approved prior to 1/15/09, Fannie Mae PERS approval is
required.
Evidence of project approval must be provided for all new or newly-converted projects in
Florida. For any loan where the project was approved via Lender Full Review to be
eligible for agency delivery, the originator must provide Wintrust with pipeline coverage
as of 1/15/09; if the project was approved via CPM prior to 1/15/09, the project approval
may be honored until the expiration date. Otherwise, Fannie Mae PERS approval is
required
Limited Reviews are not available if Wintrust Mortgage or the
Invest/Correspondent is named as a preferred lender by either the developer or the
HOA.
For established attached projects where the subject is an investment property,
financial institution-owned REO units that are for sale (not rented) may be
counted as owner-occupied units to meet the 51% presale requirements.
The following are not permitted with respect to master or blanket project
insurance:
A blanket policy that covers multiple unaffiliated condominium associations or
projects, or;
A self-insurance arrangement whereby the owners’ association is self-insured or
has banded together with other unaffiliated associations to self insure all of the
general and limited common elements of the various associations.
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PERS Submission Process
Review Request Preparation
A basic review of to determine if the project satisfied eligibility requirements prior to
PERS submission. Then a complete project submission package using the forms listed
below.
PERS Forms (Note: Interactive PDF versions of the forms that can be completed and saved
electronically can be downloaded from the Forms page on www.efanniemae.com )
1. Form 1026, Application for Project Approval
2. Form 1029, Warranty of Project Presales
3. Form 1054, Warranty of Condominium Project Legal Documents
4. Form 1051, Project Development / Master Association Plan
5. Form 1081, Final Certification of Substantial Project Completion
6. Form 1071, Statement of Insurance and Fidelity Coverage
7. Form 1073A, Analysis of Annual Income and Expenses–Operating Budget
(or complete copy of actual budget)
8. Form 1030, PERS Document Checklist
How to Submit
Submit complete package via e-mail, including all relevant supporting
documentation, to pers_project@fanniemae.com .
PERS Fees
Fee’s for any project submitted to Fannie Mae under PERS can be founded at
www.efanniemae.com.
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