Loft and Condo Warranty Changes

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Loft and Condo Warranty Changes

Loft and condo warranties for conventional conforming mortgages just got easier for new loft and condo buyers. In May of 2018 Fannie Mae updated a number of features to their guidelines dealing with loft and condo approvals for new and existing projects and buildings.

Single Entity Ownership (one owner owns more than 1 unit)

Old guideline:

Condo/Loft projects with 2-4 units – 1 unit

Condo/Loft projects with 5-20 units – 2 units

Condo/Loft projects with 21 or more units – 10%

New guideline:

Condo/Loft projects with 5-20 units – 2 units

Condo/Loft projects with 21 or more units – 20%

Additionally, the single entity ownership requirement may be waived for a loft purchase transaction that will result in a reduction of the single entity ownership concentration. In such instances, the following requirements must be met: Condo or loft units owned by the single entity represent no more than 49% of the units, evidence is required that the single entity is marketing units for sale to further reduce single-entity ownership with the goal of reducing the concentration to 20% or less of the projects units. Lastly, the single entity is current on all HOA assessments and there are no pending or active special assessments in the project.

Commercial Space or Square Footage Percentage

Old guideline: No more than 25% of a loft, condo or co-op project or 25% of the building in which the project is located be commercial space or allocated to mixed use.   This includes commercial space that is above or below grade.

New guideline: No more than 35% of a loft, condo or co-op project or 35% of the building in which the project is located be commercial space or allocated to mixed-use.  This includes commercial space that is above or below grade.

Investment property purchase

Old guideline:  Full review required

New guideline:75% or less LTV’s, CLTV’s & HLTV’s Limited Review allowed.

75.01 and above LTV’s, CLTV’s & HLTV’s Full Review required.

Established Loft or Condo Project Definition

Old guideline:  A project for which all of the following are true:

  • At least 90% of the total units in the project have been conveyed to the unit purchases.
  • The project is 100% complete, including all units and common elements.
  • The project is not subject to additional phasing or annexation.
  • Control of the HOA has been turned over to the unit owners.

New guideline:A project for which all the following are true:

  • At least 90% of the total units in the project have been conveyed to the unit purchases.
  • The project is 100% complete, including all units and common elements.
  • The project is not subject to additional phasing or annexation.
  • Control of the HOA has been turned over to the unit owners.

Conventional Loans with FHA HRAP Approvals

Old guideline:  Were not accepted.

New guideline:Fannie will now accept conventional loans with FHA HRAP approvals on established projects. New construction or newly converted projects are not acceptable.

2 to 4 Unit Loft and Condo Projects

Old guideline:  Review based on Loan-to-Value – Limited or Full.

New guideline:Project review is waived for new and established condo projects that consist of no more than 4 units.