Fannie Mae announced new measures in response to growing concerns about aging infrastructure that have followed since the deadly Champlain Towers South condo building collapse in Surfside, Fla. Fannie Mae issued temporary requirements that prevent the purchase of mortgages secured by condo and cooperative units with significant deferred maintenance. The new requirements take effect on Jan. 1, 2022.
Fannie Mae says it will continue to investigate the challenges surrounding aging condos and co-op infrastructures due to “significant deferred maintenance.” Fannie officials say they will continue to vet condo and co-op project reserves to ensure buildings are maintaining enough financial reserves to cover ongoing repairs. They also urged lenders and appraisers that appraisals on units in condo and co-op projects must document any special assessments or deferred maintenance that may impact the building.
“Condos and co-ops are an affordable homeownership option in many markets and a lifestyle choice for many buyers,” Jodi Horne, Fannie Mae’s director of single-family collateral risk management, writes in an Oct. 13 column. “With a shortage of housing supply, it’s more important than ever for us to reaffirm our commitment to supporting sustainable homeownership in condo and co-op projects.”
Horne notes the challenges posed by aging buildings that were constructed or converted into rentals in the 1970s, 1980s, and 1990s. A Community Associations Institute report from 2020 noted that association homeowners and boards too often are focused on keeping regular assessments low and “too often … associations fail to recognize serious structural and system failures. When damage becomes so obvious that it cannot be ignored, the tendency is to make superficial or temporary repairs and postpone comprehensive, in-depth restoration.”