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GSE and FHA Condo Rates 2013

GSE and FHA Condo Rates 2013

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Published by REALTORS®

This chart compares key condo rules

This chart compares key condo rules

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Published by: REALTORS® on Jan 18, 2013
Copyright:Attribution No Derivatives


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Government Affairs Update
GSE and FHA Condo Rules
(As of 1/17/2013)
Issue Fannie Mae Freddie Mac FHAOwner-OccupancyRequirementsfor EstablishedProjects.
No limit if the buyer will occupy the unit(as principal or secondary residence).If the buyer is an investor, the owner-occupancy requirement is 51%. REOunits are counted as owner-occupiedunits. REO units are those owned by afinancial institution and are for sale (notrental).Same as Fannie Mae.If the buyer is an investor, theowner-occupancy requirement is51%. Freddie does not count REOunits as owner-occupied units.For 2-4 unit projects, all but one unitmust be conveyed to purchasers(other than the developer) whooccupy units as primary residencesor second homes.50% minimum owner-occupancy requirement.
Owner-OccupancyRequirementsfor New CondoProjects
The owner-occupancy requirementvaries from 51% to 70%, conveyed orunder contract, depending on the type of project approval review process used.Fannie will consider waivers for projectsenjoying healthy sales. In response toNAR concerns, Fannie has informed NARit plans to add an FAQ re availability of waivers.At least 70% of units must beoccupied or under contract topurchasers. The units must beoccupied as primary residences orsecond homes.For 2-4 unit projects, same as forestablished projects.Owner-occupancy minimum of 30% of declared units oneach phase for new construction, proposed, or existingless than 12 months old. One year after first unitconveys, owner-occupancy requirement increases to50%.
Issue Fannie Mae Freddie Mac FHAPre-SaleRequirement forNew CondoProjects
The presale requirement varies from 51%to 70%, conveyed or under contract,depending on the project approvalreview process used.At least 70% of the total number of units in the project (or all stages, todate) must have been conveyed orbe under contract to purchasers(other than the developer or asuccessor to the developer) who willoccupy the units as primaryresidences or second homes.Waivers permitted.Presale requirement is 30% - but can apply to eachphase of a project. Presale requirement does not applyto existing projects or non-gut rehabilitationconversions.
No limit. No limit. FHA will provide insurance for up to 50% in existingprojects and will grant exceptions above this mark.Exception requests are processed by the jurisdictionalHomeownership Center (HOC).
Limit onCommercialSpace in CondoProjects
20% limit. Fannie Mae will considerwaivers when a lender has submitted aconvincing, risk-based rationale.Same as Fannie. 25% limit, but more flexibility for exceptions to beprovided up to 50%, with those up to 35% processed atlocal level, and higher with significant additionaldocumentation at Philadelphia HOC. Exceptions mayalso be made over 50%, but must be approved by theFHA Commissioner or their designee.
Elimination of Spot LoanApprovalProcess
Not eliminated. Fannie Mae continues toallow Limited Project Reviews onestablished condominiums.Not eliminated. Same as FannieMae.Effective 2/1/2010, FHA no longer offers spot loanapprovals where the project has not been approved.
Reserve Study
Not applicable. Not applicable. FHA requires a study that insures adequate funds areavailable for capital expenditures, preservation andmaintenance of amenities. The study can be no morethan 24 months old.
Issue Fannie Mae Freddie Mac FHAWaivers
Fannie approves lender requests forwaivers in appropriate circumstances.Same as Fannie. FHA will consider waiver requests to its condo policies.
Established projects may be approvedunder the Project Eligibility ReviewService (PERS) process, Lender FullReview, Limited Review, or CPMExpedited Review. New and newlyconverted projects consisting of attachedunits require approval under the PERSprocess. Loan-to-value ratios depend ontype of project approval.Special Approval designation introducedby Fannie Mae on 1/7/2010 forestablished condominium projects thatare otherwise not approvable by FannieMae standards.To qualify for sale to Freddie Mac,condo unit mortgages secured byattached units in new condoprojects in Florida must be approvedthrough the Fannie Mae ProjectEligibility Review Service (PERS)process. Lower loan-to-value (LTV)limits apply (75% for primaryresidences; 70% for second homes).Projects must use HUD Review Approval Process (HRAP).
No more than 10% of the units may beowned by any one investor. This doesnot apply to the developing entity in anew condominium during the salesprocess. Same as Fannie. No more than 50% of the units may be owned by oneinvestor at time of project approval provided at least50% of the units have been conveyed or are undercontract as owner-occupied. In addition, unoccupiedand unsold units owned by a builder/developer are nolonger included in the calculation of investor ownership.

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