The quality of mortgages secured by units in condo, co-op, and planned unit development (PUD) projects can be influenced by certain characteristics of the project or by the project as a whole. Before delivering a loan secured by an individual unit in a project, the lender must determine that the project meets Fannie Mae's eligibility requirements.
Project eligibility risk is a risk that is distinct from the credit risk presented by individual borrowers. Units located in a project present risks that are also distinct from the risks associated with properties that are not part of a homeowners’ association (HOA) or project. These risks include the following:
Project eligibility and financial strength are key drivers of credit performance on individual unit mortgages and critical to the long-term success of the project. Fannie Mae’s project eligibility and underwriting requirements seek to mitigate project level risks and to ensure that projects are demonstrably well-managed.
Lenders that sell mortgage loans secured by units in a condo, co-op, or PUD project to Fannie Mae are expected to have staff that are knowledgeable about and qualified to evaluate the specific risks presented by these types of projects. The project review is in addition to the review the lender completes for underwriting the borrower, the transaction terms, and the individual unit appraisal.
Fannie Mae’s project standards requirements are intended to address common project types across a broad geographic range. If a lender determines that a project does not meet all of Fannie Mae’s project eligibility criteria, but feels that the project has merit and warrants additional consideration, the lender may request an exception (see B4-2.2-07, Projects with Special Considerations and Project Eligibility WaiversB4-2.2-07, Projects with Special Considerations and Project Eligibility Waivers , for additional information).
The documentation needed to complete a project review may differ depending on the project and review type. Lenders are responsible for determining the documentation needed to ensure that the project meets all of Fannie Mae’s eligibility requirements. Project documentation may include, but is not limited to, the following:
Sources for project information include, but are not limited to, appraisers, HOAs, co-op corporations, management companies, real estate agents, insurance professionals, and project developers. Lenders are responsible for the accuracy of any information obtained from these sources.
Document Retention
Lenders must retain all of the project documentation needed to demonstrate that the project meets Fannie Mae’s eligibility requirements, including any documentation the lender relied upon to enter information into CPM. This documentation must be retained, and made available upon request, as long as lenders originate mortgages from the project, and until all mortgages sold to Fannie Mae have been liquidated.
The Condominium Project Questionnaire (Form 1076) helps lenders collect data to determine condo project eligibility. This form is optional; however, lenders are encouraged to use and retain the form in the loan file. A substantially similar form may also be used in its place.
The scope of Fannie Mae’s requirements and the specific eligibility criteria to be met are dependent upon various project types and/or loan level characteristics. The characteristics that define each project type are described in the following table.
A project may also be treated as an established project with less than 90% of the units sold to unit purchasers, provided the deficit is the result of the developer holding back units for rent. The following requirements must be met:
See B4-2.3-01, Eligibility Requirements for Units in PUD ProjectsB4-2.3-01, Eligibility Requirements for Units in PUD Projects , for additional detail used in determining whether a project is subject to Fannie Mae’s PUD eligibility requirements.
Horizontal Property Regimes
Fannie Mae considers a development to be a condo project any time it is declared or filed as a horizontal property regime in accordance with local statutes. Exception is made, if the local statute provides for the horizontal property regime to be created as a PUD development and the project’s legal documents specifically state that the project is a PUD.
Lenders must determine if the subject unit is located in a condo or PUD and use the appropriate mortgage documents and appraisal forms.
Fannie Mae purchases or securitizes mortgage loans secured by units in condo, co-op, and PUD projects that meet Fannie Mae's eligibility requirements. To determine whether the project meets these requirements, a number of project review methods are available. Whether a project review method is allowable or required depends on
The characteristics that dictate which method to use are shown in the following table.
Projects not meeting the Limited Review criteria must be reviewed using a
Project review is waived, with the exception of some basic requirements that apply.
Note: Lenders must obtain special approval to be eligible to deliver co-op share loans to Fannie Mae secured by ownership interest in a co-op share project. See A2-1-01, Contractual Obligations for Sellers/ServicersA2-1-01, Contractual Obligations for Sellers/Servicers , for additional information.
Fannie Mae does not require a thorough project review for several types of projects or loan transactions, including:
See B4-2.1-02, Waiver of Project ReviewB4-2.1-02, Waiver of Project Review for additional information and for the requirements that apply when a project review is waived.
All mortgages secured by units in condo, co-op, or PUD projects must comply with the following:
Fannie Mae allows a limited amount of regular common expense assessments (typically known as HOA fees) to have priority over Fannie Mae’s mortgage lien for mortgage loans secured by units in a condo or PUD project. This applies if the condo or PUD project is located in a jurisdiction that has enacted
The table below describes the permitted priority of common expense assessments for purposes of determining the eligibility of a mortgage loan secured by a unit in a condo or PUD project for purchase by Fannie Mae.
| If the condo or PUD project. | Then. |
|---|---|
| is located in a jurisdiction that enacted a law on or before January 14, 2014, that provides that regular common expense assessments will have priority over Fannie Mae’s mortgage lien for a maximum amount greater than six months, | the maximum number of months of regular common expense assessments permitted under the applicable jurisdiction’s law as of January 14, 2014, may have priority over Fannie Mae’s mortgage lien, provided that if the applicable jurisdiction’s law as of that date referenced an exception for Fannie Mae’s requirements, then no more than six months of regular common expense assessments may have priority over Fannie Mae’s mortgage lien. |
| is located in any other jurisdiction, | no more than six months of regular common expense assessments may have priority over Fannie Mae’s mortgage lien, even if applicable law provides for a longer priority period. |
Notwithstanding any provisions to the contrary in the Guide, which do not require the lender to represent or warrant compliance with Fannie Mae project legal document requirements, the condo or PUD project legal documents must evidence compliance with the above priority of common expense assessment requirements.
When delivering a loan for a unit located in a project, the lender must provide the Project Type Code and any applicable special feature codes as shown in the following table. The lender must also report all other applicable special feature code(s), including those specified in a variance in the Lender Contract and in the Special Feature Codes document on Fannie Mae's website.
| Project Type Code | Description |
|---|---|
| E | Established PUD project |
| F | New PUD project |
| P | Limited Review—New condo project |
| Q | Limited Review—Established condo project |
| R | Full Review—New condo project |
| S | Full Review—Established condo project |
| T | Fannie Mae-approved condo or PUD project, including those approved through PERS |
| U | FHA-approved condo project |
| V | Condo project review waived - for certain project and transaction types |
| 1 | Full Review—Co-op project |
| 2 | Fannie Mae-approved co-op project, including those approved through PERS |
| Special Feature Code | Description |
| 588 | Detached Condominium Unit |
Used to identify detached units in an attached or detached condominium project
Project Eligibility Waiver
Used to identify loans for which Fannie Mae has provided a loan-level waiver for a specific project eligibility requirement
CPM ID Delivery Requirements
Lenders are required to deliver the CPM ID number in the field for "FNM Condominum Project Manager Project Identifier" (Sort ID 39) in ULDD for the following projects:
Lenders are encouraged to include the condo or co-op’s HOA or Project IRS Federal Tax Identification Number (TIN) in the loan file and in CPM.
Project reviews must meet the following timeline requirements.
Loans must be delivered to Fannie Mae within 120 days following the note date. When the elapsed time between note date and delivery date exceeds this limit, the lender may deliver the loan only if the project continues to meet Fannie Mae project eligibility requirements at the time of delivery.
Loans secured by units in a project that fails to meet Fannie Mae’s project eligibility requirements under the applicable review type as of the note date are eligible for delivery after the project comes into compliance with the eligibility requirements (provided all standard mortgage seasoning and other applicable requirements are met). For example, if a lender closes a loan in a new project for which the pre-sales are less than the pre-sale requirement, the lender may deliver the loan after the project’s pre-sales meet the Fannie Mae requirement (assuming the loan meets all other applicable requirements).
Recent Related AnnouncementsThe table below provides references to recently issued Announcements that are related to this topic.
| Announcements | Issue Date |
|---|---|
| Announcement SEL-2023-02 | March 01, 2023 |
| Announcement SEL-2022-02 | March 02, 2022 |
| Announcement SEL-2021-11 | December 15, 2021 |
| Announcement SEL-2021-03 | April 07, 2021 |
| Announcement SEL-2021-02 | March 03, 2021 |
| Announcement SEL-2020-07 | December 16, 2020 |
| Announcement SEL-2020-04 | August 05, 2020 |
| Announcement SEL-2020-03 | June 03, 2020 |
| Announcement SEL-2019-07 | August 07, 2019 |
| Announcement SEL-2019-06 | July 03, 2019 |