FNMA/FHLMC Condo & PUD Definitions - Wintrustmortgage.net

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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. Page 6 of 9 5/15/2009-Wholesale
***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 Page 7 of 9 5/15/2009-Wholesale
Page 1 and 2: FNMA/FHLMC Condo & PUD Definitions
Page 3 and 4: Check state list for condo project
Page 5: CPM Expedited Review (S) (Establish
Page 9: PERS Submission Process Review Requ

FNMA/FHLMC Condo & PUD Definitions - Wintrustmortgage.net

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