Florida is the mecca for condo living. East coast, west coast, the Panhandle, Orlando – no matter where you go in Florida, it’s likely you will trip over a condominium complex. However, the carefree condo living turnkey lifestyle so many Floridians have come to love is under the scrutiny of Fannie Mae and Freddie Mac.
I’ve written frequently about needing a “condo personality” to successfully embrace the condo lifestyle. “Live and let live” is the approach all condo owners should adopt. Losing total control of your property and the ability to make even small decisions is not for everyone.
You may love that all of the landscaping is taken care of, but you may hate that you can’t plant your tomatoes at the beginning of the season. You may love that you don’t need to clean and add chemicals to the pool, but you may hate when another resident tells you your grandchildren are making too much noise. And you may love that the roof repairs are someone else’s responsibility, but you won’t like the special assessment you have to pay to do the repairs.
Now, after the Surfside catastrophe, as predicted, there is more fallout. Florida lawmakers have passed legislation requiring recertification of condominium buildings three stories or taller that are more than 30 years old, or more than 25 years old within 3 miles of the coast, ongoing every 10 years thereafter. Now Fannie Mae and Freddie Mac are getting into the act.
The majority of lenders follow Fannie and Freddie guidelines when they are qualifying individuals for home mortgages, and they in turn guarantee the loans. Now Fannie and Freddie are requiring certain actions in order to mitigate their risk of loss for mortgages they are backing. The quasi-governmental agencies are creating a database of condominiums ineligible for financing and, therefore, they will not approve mortgages for buyers in these buildings.
Primarily they are looking for maintenance issues in older condo buildings that will make them ineligible for secured mortgages. The major issue is significant deferred maintenance and unsafe conditions. Are the deficiencies, defects, substantial damage or deferred maintenance severe enough to affect the safety, soundness, structural integrity or habitability of the property? Do the required improvements impede the safe and sound functioning of one or more of the building’s major structural or mechanical elements? And has the building not passed or completed inspection required by local ordinance or state statute?
In addition, lenders, with the assistance of condo boards and/or managers, are being asked to complete a questionnaire regarding the condition of the building. Most of the questions involve knowledge of deficiencies in structural integrity and safety. Some of these questions can be answered by board members, who are usually residents of the building, but others may require professional documentation. As of now the permanent requirements are still being worked on and will be available to lenders in the coming months.
This will be a new responsibility for condo boards whose directors are charged with maintaining buildings and preserving their value. If a lender is uncertain or unable to confirm the safety of the building, they will decline the loan so as not to jeopardize their relationship with Fannie Mae and Freddie Mac.
At this point it’s confusing, but will probably smooth out over time. If you own a condo unit or are considering purchasing one, be aware of changes on the horizon. Even if your purchase does not require financing, you still want to guarantee the building you’re purchasing is secure in order to keep your carefree lifestyle carefree.
