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New Temporary Requirement for Condos and Co-Ops due to Champlain South Tower Collapse

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New Temporary Requirement for Condos and Co-Ops

Fannie Mae has a new temporary requirement for condo and co-op projects due to the collapse of the Champlain South Tower in Surfside, FL. In response to concerns over projects with significant deferred maintenance, Fannie Mae is issuing temporary new requirements effective Jan 1, 2022.

Buyer putting less than 10% down

If a buyer has less than 10% down, then Fannie and Freddie trigger a “full condo review” which includes these additional questions. One of them is regarding the amount being put into reserves each month. If the condo doesn’t have 10% allocated to reserves in the budget, then it won’t be approved. Also there are questions if there are special assessments or deferred maintenance on the horizon.


Buyer putting 10%+ down

Putting 10% down on an owner occupied property allows for a limited review, however, the deferred maintenance questions will still be required.


The Details for Those Who Want to Know it All

“The below temporary guidelines are applicable to condominiums with 5+ units regardless of whether it’s a limited review (10%+ down) or full review (<10% down). The one distinction I’ll make is if a buyer is putting down 10%+, then we are not obligated to underwrite the budget and thus not obligated to verify reserve funding. We’d however have to delve into the budget and reserve funding if in the below documentation that’s referenced, the documents gives us reason to be concerned.



Appraisers must document any special assessments or significant deferred maintenance that may impact the unit’s safety and soundness or marketability, or the financial stability or physical safety of the overall project and its amenities.


Best practices – Lenders

To help lenders meet Fannie Mae’s requirements, we strongly recommended that lenders follow these best practices.

• Review the past six months of a project’s homeowners’ association (HOA) meeting minutes and obtain information about any maintenance or construction

that may have material safety or soundness impacts on the unit or the project. Any references to the following items identified during the lender’s project

review should be researched to determine if significant deferred maintenance exists:

◦ Deferred maintenance;

◦ Special assessments;

◦ Improvements or renovations; and

◦ Inadequate reserve funding, budget deficits, or negative cash-flows.

• Review any available inspection, engineering, or other certification reports completed within the past five years to identify significant deferred maintenance

that may need to be addressed. ”

(Source: Fannie Mae’s lender letter LL-2021-14)


Where to Get More Info

Fannie just addressed this with question 12 in their recent FAQs.