Did You Know?
New Lender Requirements by Fannie Mae and Freddie Mac Require Current Reserve Studies To Provide For Sufficient Funding.
By Adrian Chiang, Esq.
We are sharing a helpful summary published by Community Associations Institute regarding the new Fannie Mae and Freddie Mac lending requirements that took effect on September 18, 2023. Your association is likely impacted since “As of 2023, Fannie Mae and Freddie Mac support around 70 percent of the mortgage market, according to the National Association of Realtors. Most conventional loans offered by private lenders end up being backed or purchased by Fannie Mae or Freddie Mac.” Therefore, it is crucial that associations meet the lending requirements set forth to maximize the available funding options for prospective buyers and for association homes to maintain their value.
Lender requirements are nothing new however, after the Champlain Towers South condominium building collapse in Surfside, Florida, in 2021, lender requirements have become more stringent to try and prevent similar catastrophes. One lending requirement is that associations have current reserve studies that are prepared and shared with the lender for further review and examination to check the status and cost of the remaining life of association-maintained components. As part of the lenders’ review, the adequacy of an association’s budget for the reserve studies will also be examined.
So, for those associations that do not regularly have reserve studies performed or updated as required by Civil Code Section 5550, these associations should do so now and make sure they are reserving sufficient funds for deferred maintenance and lending eligibility!