In the days following the tragic condo building collapse in Surfside, Florida, information emerged about known issues with that building. Several nearby condo buildings were evacuated because they too had significant deferred maintenance that led to potentially life-threatening structural deficiencies. The tragedy has focused attention on an emerging challenge: significant deferred maintenance of aging condo and co-op infrastructure.
In response to increasing concerns about aging infrastructure, Fannie Mae has taken measures to address issues of significant deferred maintenance that may impact the safety, soundness, structural integrity, or habitability of a condo or co-op unit or the overall project and its amenities (Lender Letter LL-2021-14, Temporary Requirements for Condo and Co-op Projects).
We are reminding lenders and appraisers that they have interconnected duties when it comes to condo and co-op projects. For loans sold to us that are secured by units in condo and co-op projects, lenders are responsible for determining that the projects meet all applicable Fannie Mae eligibility requirements. Appraisers must document any special assessments or significant deferred maintenance that may impact the unit’s safety and soundness or marketability, or the financial stability or physical safety of the overall project and its amenities.
We have long required that appraisals of condos address special assessments and deferred maintenance, because those factors can significantly impact value, marketability, and homeownership sustainability.
We’ve published a new fact sheet providing guidance for appraisers and lenders, Appraising and underwriting condo and co-op projects. Appraisers play a key role in supporting sustainable homeownership opportunities for a range of housing types and helping to protect borrowers from physically unsafe or financially unstable projects. Key appraiser responsibilities when appraising condo or co-op units include:
· Enter any special assessment applicable to the subject property in the Special Assessment field located in the Subject section of the appraisal report. State in the body of the report: the outstanding balance; the payment plan, including duration; and what the assessment is being used for.
· Any significant deferred maintenance may be described as a part of the condition of the individual unit or it may be a part of the overall project information (condition section) in the appraisal report.
We know that getting these details can be challenging. The lender, the borrower, and the project management company may have this information and should provide it to the appraiser.
Appraisers should make every effort to obtain information about special assessments and significant deferred maintenance — the appraisal is not complete without it!
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