New condo mortgage rules could mean delays, denials and higher costs
Buyers beware: Starting on Monday, new rules from Fannie Mae and Freddie Mac go into effect that could make it trickier to obtain a mortgage for a condo. The new policies, announced by the two government-sponsored enterprises back in March, could add some complexity to the sales process as the condo association will face new scrutiny as part of the loan approval process. While the goal is to…
Starting Monday, new mortgage rules from Fannie Mae and Freddie Mac could complicate condo purchases. The changes, announced in March, require more thorough condo association financial reviews, raising potential delays and higher costs. The new rules, aimed at identifying risky condos, could add scrutiny and documentation requirements, potentially causing loan approvals to take longer.
Fannie and Freddie, which finance about 70% of home loans, aim to better evaluate condo buildings' financial and structural risks. However, the changes remove a streamlined review process, increase reserve fund requirements for condo associations, and modify rules around investor units and insurance coverage. Critics warn that the more rigorous process could hinder condo sales, with lenders, realtors, and condo boards scrambling to adapt.
Some trade groups have even called for delaying the new financing requirement by a year to give associations time to understand and comply with the changes.
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