Lender Requirements

In response to the tragic collapse of a condominium in Surfside, FL, Fannie Mae and Freddie Mac enacted significantly updated multifamily lending requirements that became effective Q1 2022 for properties throughout the United States.

• This page is intended to be your definitive guide to lender requirements for condominiums and cooperatives (co-ops).

• Fannie Mae and Freddie Mac have permanently adopted enhanced lending requirements as of July 2023.

• Associations are required to provide responses to lender questions from Fannie and Freddie. 

• Applicable to multifamily residential properties with 5 or more attached units.  Reference FNMA requirements for ineligible Projects in B4-2.1-03.

• >= 10% of the annual operating budget must be dedicated to funding the replacement reserve (suspension of Selling Guide flexibility)

• All existing and upcoming / new special assessments will be reviewed to determine their origin, terms and potential negative impacts

• Properties subject to repair mandates by a governmental authority are ineligible until repairs are complete and documented

• Properties that have significant deferred maintenance and in need of critical repairs are ineligible until repairs are complete and documented

  • Projects in need of critical repairs are those needing repairs or replacements that significantly impact the safety, soundness, structural integrity or habitability of the project's building(s), or the financial viability or marketability of the project.  Read the full text for critical repairs.

• Litigation or pre-litigation: Projects in which the association or co-op is named as a party to pending litigation, or for which the project sponsor or developer is named as a party to pending litigation that relates to the safety, structural soundness,habitability, or functional use of the project.

• Non-incidental business arrangements: If >=10% of budgeted income is derived from non-incidental business arrangements related to the active ownership and/or operation of amenities or services available to unit owners and the general public. This includes, but is not limited to, businesses such as a restaurant or other food- and beverage-related services, health clubs, and spa services.

• Freddie Mac 5701.5(e): Reserve study requirements for established condominium projects:

  • A reserve study’s financial analysis must validate that the project has appropriately allocated the recommended reserve funds to provide the Condominium Project with sufficient financial protection comparable to Freddie Mac’s standard budget requirements for replacement reserves

  • The reserve study’s annual reserve funding plan, which details total costs identified for replacement components, must meet or exceed the study’s recommendation and conclusion

  • The most current reserve study (or update) must be dated within 36 months of the Seller’s determination that a Condominium Project is eligible

  • The reserve study must be prepared by an independent expert skilled in performing such studies (such as a reserve study professional, a construction engineer, a certified public accountant who specializes in reserve studies or any professional with demonstrated experience and knowledge in completing reserve studies)...