FHA and Fannie Mae Compliance & Mandatory Reserve Requirements
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As presented by National Condo Advisors' CEO Orest Tomaselli at the Chicagoland
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FHA and Fannie Mae Compliance & Mandatory Reserve Requirements
- 1. CONDO LENDING GUIDELINE UPDATE: FHA and Fannie Mae Compliance & Mandatory Reserve Requirements Presented by: Orest Tomaselli, CEO Na7onal Condo Advisors, LLC 1
- 2. NaEonal Condo Advisors, LLC: The na7on’s premier condominium project approval service. www.na7onalcondoadvisors.com Ph. 888-‐726-‐6361 2
- 3. Overview • FHA guideline compliance • FHA Project CerEficaEon requirements • 10% budget reserve requirement • Mandatory Reserve Study requirements • Fannie Mae guideline compliance Those who don’t comply: The non–warrantable 3
- 4. FHA Lending: Important? • Approximately 30% of all mortgage loans na7onwide • Reverse mortgages allow homeowners above the age of 62 a unique op7on for financing • Allows mortgages with lower down payment and reduced credit score requirements Recent project approval withdrawal has recently resulted in over 9200 developments na;onally that were removed from the project approval list 4
- 5. FHA Condo Guideline Compliance: The Basics • Project approval is required for any FHA financing within a condominium community • Individual ‘spot loan’ approval discon7nued • At least 50% of the units are owner occupied • No one investor can own more than 10% of the units within the development • No more than 15% of the total units are more than 30 days past due on HOA dues. The 15% includes bank owned and vacant units 5
- 6. FHA Project CerEficaEons: Updated Compliance Requirements • Signing the project cer7fica7on • State and local law compliance cer7fica7on Whom is qualified to make this representaEon? • Ongoing cer7fica7on obliga7on What are the risks in cerEfying to ongoing compliance? • Up to $1,000,000 fine and 30 years imprisonment for false or fraudulent statements • Knowing penal7es for fraudulent cer7fica7on 6
- 7. FHA Project CerEficaEons: PotenEal Landmines • Community Associa7on Loans Are you automaEcally rejected if your community has a loan? • Special Assessments What will you have to submit? • Pending Li7ga7on What has to be disclosed? Statement must be signed by aSorney • Transfer Fees 7
- 8. Reserve Requirements • 10% Line item for reserves In the absence of a specific guideline requiring a reserve study, a 10% line item within the budget is to be uElized • In order to accurately fund the reserve account for a condominium, a reserve study, that is compliant with FHA and Fannie Mae guidelines, can be u7lized. Provides accurate reserve requirements and funding overview. DeterminaEon of reserve study, whether higher than 10% or lower than 10%, may be uElized as a line item for reserve. 8
- 9. Mandatory Reserve Study FHA • Newly converted non-‐gut rehab conversion condo • Newly converted gut rehab condo • Distressed asset purchases • Proper7es with li7ga7on • At the discre7on of underwri7ng Fannie Mae • Non-‐gut rehab conversion condo 9
- 10. New Condominium Developments: Distressed Asset Purchases • Bankruptcy/Receivership/Foreclosure/ Deed-‐in-‐Lieu of Foreclosure One year aging required for eligibility Financial document review to determine eligibility Reserve study required • Asset Sale 50% of declared units must be owner occupied Reserve study required AddiEonal financial oversight may be requested 10
- 11. Fannie Mae • Warranty of condo project legal requirements • Compliance with laws • Limita7ons on ability to sell/right of first refusal • Amendments to documents • Rights of condo mortgagees and guarantors • First mortgagee’s rights confirmed • Unpaid dues • Fannie Mae Form 1054 11
- 12. Those Who Don’t Comply: The non-‐warrantables • Limited available lending • Increased interest rates • Limited loan terms 12
- 13. Thank you! Ques7ons? Stop by booth #407 and meet Reserve Study expert Dave Nielsen from Strategic Inspec7ons. Ask him about a free reserve study pre-‐determina7on! 13
- 14. *Na7onal Condo Advisors, LLC is not a law firm. None of the guidance or advice contained within should be considered or construed as legal advice from either NCA or any of its employees. We recommend you consult with your ajorney regarding the informa7on provided within. www.na7onalcondoadvisors.com Ph. 888-‐726-‐6361 14