Broker Risk Management has been made aware that Fannie Mae/Freddie Mac (“Freddie/Fannie) are requiring lenders and Homeowner Associations and Management Companies to complete a “Condominium Project Questionnaire” as part of their underwriting requirements for funding loans on the purchase of a condominium.
The information that the questionnaire seeks includes detailed information on whether the project was a condominium conversion, what repairs have been made to the property, the status of those repairs, estimated costs of any unfinished repairs, insurance coverages, the sufficiency of reserves, whether there are any outstanding code violations or local government certification requirements, amongst others.
See the Fannie Mae Condominium Project Questionnaire accompanying this Broker Alert for an example of this questionnaire, which may be changed by Fannie Mae and/or Freddie Mac
Completing this questionnaire is not required by California law. There have been reports of some HOA boards or management companies refusing to complete and sign the questionnaire for fear of potential liability if the answers are incomplete or wrong. If an HOA fails or refuses to complete the questionnaire, it is likely that Freddie/Fannie will not accept the loan and the lender will not give the buyer a loan commitment.
PRACTICE TIPS:
1. Agents representing Sellers of condominiums should ask Sellers to check with the HOA as to whether the HOA has, or is willing to, complete this Questionnaire. If the HOA has not and will not sign the Questionnaire, Sellers’ Agents need to manage the Sellers’ expectations about the ability to sell the Property to Buyers who need to obtain institutional financing.
2. Agents representing Buyers of condominiums should:
A. Ask Buyers to check with the Buyers’ lender/mortgage broker before preparing an offer as to whether the HOA for the condominium has signed, or is willing to sign, that Questionnaire; and,
B. Warn Buyers in writing not to remove or waive the loan contingency until the lender has issued a written loan commitment that does not contain a contingency for Freddie/Fannie and/or the lender receiving an HOA completed questionnaire satisfactory to Freddie/Fannie.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION. Do not forward to sellers, buyers or third parties. This Broker Alert is for the exclusive use of clients of Broker Risk Owners and Management. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
The information that the questionnaire seeks includes detailed information on whether the project was a condominium conversion, what repairs have been made to the property, the status of those repairs, estimated costs of any unfinished repairs, insurance coverages, the sufficiency of reserves, whether there are any outstanding code violations or local government certification requirements, amongst others.
See the Fannie Mae Condominium Project Questionnaire accompanying this Broker Alert for an example of this questionnaire, which may be changed by Fannie Mae and/or Freddie Mac
Completing this questionnaire is not required by California law. There have been reports of some HOA boards or management companies refusing to complete and sign the questionnaire for fear of potential liability if the answers are incomplete or wrong. If an HOA fails or refuses to complete the questionnaire, it is likely that Freddie/Fannie will not accept the loan and the lender will not give the buyer a loan commitment.
PRACTICE TIPS:
1. Agents representing Sellers of condominiums should ask Sellers to check with the HOA as to whether the HOA has, or is willing to, complete this Questionnaire. If the HOA has not and will not sign the Questionnaire, Sellers’ Agents need to manage the Sellers’ expectations about the ability to sell the Property to Buyers who need to obtain institutional financing.
2. Agents representing Buyers of condominiums should:
A. Ask Buyers to check with the Buyers’ lender/mortgage broker before preparing an offer as to whether the HOA for the condominium has signed, or is willing to sign, that Questionnaire; and,
B. Warn Buyers in writing not to remove or waive the loan contingency until the lender has issued a written loan commitment that does not contain a contingency for Freddie/Fannie and/or the lender receiving an HOA completed questionnaire satisfactory to Freddie/Fannie.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION. Do not forward to sellers, buyers or third parties. This Broker Alert is for the exclusive use of clients of Broker Risk Owners and Management. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.