Condo building

Changes to Lending Guidelines After the Champlain South Tower Collapse

As a result of the deadly collapse of the Champlain South Tower in Surfside, Florida, in June 2021, Fannie Mae and Freddie Mac issued changes in Q4 of last year to their lending guidelines in light of projects with significant deferred maintenance.

With these new guidelines taking effect in 2022, purchasers may encounter challenges when trying to finance the acquisition of condos (with five or more attached units) of similar age and condition. Increased scrutiny on documentation such as homeowners’ association (HOA) meeting minutes, inspection details and engineering reports is anticipated.

How is “significant deferred maintenance” defined by both agencies?

As defined by Fannie Mae’s Lender Letter (LL-2021-14), “Significant deferred maintenance includes deficiencies that meet one or more of the following criteria:

  • full or partial evacuation of the building to complete repairs is required for more than seven days or an unknown period of time;
  • the project has deficiencies, defects, substantial damage, or deferred maintenance that
    • is severe enough to affect the safety, soundness, structural integrity, or habitability of the improvements;
    • the improvements need substantial repairs and rehabilitation, including many major components; or
    • impedes the safe and sound functioning of one or more of the building’s major structural or mechanical elements, including but not limited to the foundation, roof, load bearing structures, electrical system, HVAC, or plumbing.”

What could this mean for my mobility program?

Be Aware: Delays and frustration could result for both buyers and sellers due to the added paperwork and information from HOAs and reliance on HOAs’ responsiveness.

Recommendation: A buyer should not waive contingencies when related to the lender’s approval of the property especially if a condo/co-op is involved.

Consideration: Do you restrict condos and co-ops in your home sale program if they don’t qualify for FHA financing? If you do, these new guidelines may expand ineligible properties in your program.

Stay Alert: Know your primary home sale locations. The tower in Surfside may have been damaged by saltwater seeping into its underground foundation. Properties located along the U.S. coastline may be at higher risk for vigilant maintenance.

5.8% of Altair 2022 Home Sale Closings YTD Have Been Condos

About Global Consulting Services:

Altair Global Consulting Services

One size doesn’t fit all when it comes to our Client Partners’ programs, policies and cultures. In order to deliver an unmatched mobility experience, we provide expert recommendations and insights to build and strengthen our clients’ benefit offerings to meet their overall business and talent mobility objectives for the future. Working with more than 100 companies each year, Altair’s Global Consulting Services team takes a holistic approach to mobility by arming clients with first-rate data, research and trend information to find the best relocation and mobility solutions for your employees, your mobility program and your company.

Published On: May 4, 2022

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