By Tami L. Seekins, Esq

After the collapse of Champlain Towers South Condominium in Surfside, Florida last year, federal governmental entities began to increase scrutiny of the safety, integrity, and soundness of condominiums. That increased scrutiny resulted in new requirements that not only impact buyers and sellers, but Board Directors and Community Managers.

Fannie Mae and Freddie Mac are government sponsored entities created by Congress that operate under the oversight of the Federal Housing Finance Agency (“FHFA”).   Fannie Mae and Freddie Mac do not lend money directly to the public; instead, they purchase or guarantee loans from a mortgage lender.  If you own a home, it is likely backed by Fannie Mae or Freddie Mac.

In the aftermath of Champlain Towers, Fannie Mae and Freddie Mac made changes to the requirements mortgage lenders must follow for Fannie Mae and Freddie Mac to purchase or guarantee their mortgage loans for housing that contain five (5) or more attached units.

The new requirements are intended to mitigate the risk of losses by refusing to purchase or guarantee mortgages for condominiums that have significant deferred maintenance, unsafe conditions, special assessments that address safety projects, reserve funding that is less than 10% of the association’s assessment income dedicated to reserves, or no reserve study.

The “Condominium Project Questionnaire Addendum” (Form 476A) is a voluntary form to assist lenders in determining whether a project meets the new requirements.  Most questions may be answered by Board Directors or the Community Manager.  In completing the form, an association will likely have to provide documentation such as Board meeting minutes, building inspection reports/engineering reports, code violations, maintenance schedule, and the reserve study.  Lenders and appraisers may also rely on other sources of information in determining the safety and structural soundness of the building(s).

The new requirements will also create a database of condominiums that are ineligible for backing; only lenders will have access to this database. Fannie Mae and Freddie Mac have stated they will not back loans if the lender is uncertain or unable to confirm the safety, soundness, integrity, and habitability of the building(s), or if the lender is on the ineligible list.  The new lending requirements are expected to become permanent this year.

No one wants to see a repeat of the tragedy that happened to Champlain Towers.  While these new requirements may impose additional work to allow purchasers to obtain certain loans, the work will be worth the extra effort, if it ultimately helps saves lives by requiring condominium associations to properly maintain building(s).


The information provided herein is for reference purposes only, is general in nature, and is not intended as legal advice.  For specific questions or legal issues regarding your association, please contact us at 480-219-3633.