Contents PUDS (Established Attached/Detached)... 2 CONDOS-Short/Limited Review... 3 CONDOS-Full Review... 5 1 P a g e
PUDS (Established Attached/Detached) How do I determine if my property is a PUD? If the subject meets ALL of the following it is by Fannie Mae definition, a PUD: Each unit owner s membership in the HOA must be automatic and nonseverable, The payment of assessments related to the unit must be mandatory, Common property and improvements must be owned and maintained by an HOA for the benefit and use of the unit owners, and The subject unit must not be part of a condo or co-op project. Zoning is not a basis for classifying a project or subdivision as a PUD. Units in projects or subdivisions simply zoned as PUDs that include the following characteristics are not defined as PUD projects under Fannie Mae s policies. These projects Have no common property and improvements, Do not require the establishment of and membership in an HOA, and Do not require the payment of assessments. (For further information Please refer to Fannie Mae Section B4-2.3-01) Please note: Attachment type (attached/detached) does necessarily define the property as being a PUD What documentation is required if my property is a PUD? It is not necessary to obtain Declarations and Bylaws on all loan files but may be required in certain circumstances (see below). Please note: The condominium project questionnaire forms are NOT required for attached OR detached PUDs. HOA Blanket Policy. o If the policy does not have walls in coverage, an HO6 policy is required as well (20% of appraised value coverage is required) an individual policy is required for detached units (Fannie Mae section B7-3-04). When will Declarations and Bylaws be required? Declarations and Bylaws will be required under certain circumstances such as: o Shared well and or septic that is maintained by the HOA, o PIW option is being exercised, or 2 P a g e
o In the event that the property type is in question Declarations and Bylaws will be required for ALL Florida PUD properties (due to priority of common expense assessments requirements. Fannie Mae Section B4-2.1-02) o Please note Fannie and Freddie Differences Fannie Mae: Florida permits 12 months of common expense assessments take priority to the 1 st lien which makes the property ineligible for Fannie Mae financing. Unless the Declarations specifically indicate that the HOA only allows 6 months the property is ineligible for Fannie Mae financing. Freddie Mac: Allows the 12 months in the state of Florida. ** Freddie Mac Section 9701.10 Other pertinent Fannie Mae information for PUDs: NEW subdivisions require a comparable sale from within that project or subdivision in order to be eligible for secondary market financing o Fannie will accept two pending sales (not listings) in lieu of one closed sale in the subject subdivision or project in the event closed sales are not yet available. When this flexibility is used, the appraiser must also provide at least three closed comparable sales from outside the subject subdivision or project. CONDOS-Short/Limited Review Short/Limited Review What documentation is required? It is not necessary to obtain Declarations and Bylaws on all loan files but may be required in certain circumstances (see below). Fannie Form 1077 (Short/Limited Review Form) must be completed by the HOA HOA Blanket Policy. If the policy does not have walls in coverage, an HO6 policy is required as well (20% of appraised value coverage is required) an individual policy is required for detached units. (Fannie Mae section B7-3-04) When will Declarations and Bylaws be required? Declarations and Bylaws will be required under certain circumstances such as: o Shared well and or septic that is maintained by the HOA 3 P a g e
o PIW option is being exercised, or in the event that the property type is in question. Declarations and Bylaws will be required for all Florida Condo properties (due to priority of common expense assessments requirements. Fannie Mae Section B4-2.1-02) o Please note Fannie Mae and Freddie Mac differences: Fannie Mae: Florida permits 12 months of common expense assessments take priority to the 1 st lien which makes the property ineligible for Fannie Mae financing. Unless the Declarations specifically indicate that the HOA only allows 6 months the property is ineligible for Fannie Mae financing. Freddie Mac: Allows the 12 months in the state of Florida. (Freddie Mac Section 9701.10) Other pertinent information for Fannie Mae Limited Review Condos: Florida Condos located in new or newly converted projects are ineligible unless the project has been approved through Fannie Mae (PERS) (Fannie Mae section B4-2.2-04). Florida Condos in established projects have specific LTV restrictions See Fannie Mae section B4-2.2-04 for further information Flood insurance can be included in HOA dues and does not need to be escrowed separately. A legal review of the project is required when the subject is an attached unit in a new or newly converted project (See Fannie Mae section B4-2.2-03). Review for right of first refusal or legal review of the project on the subject when the project is considered established is not required (See Fannie Mae section B4-2.2-03). NEW projects and subdivisions require a comparable sale from within that project or subdivision in order to be eligible for secondary market financing. o Fannie will accept two pending sales (not listings) in lieu of one closed sale in the subject subdivision or project in the event closed sales are not yet available. When this flexibility is used, the appraiser must also provide at least three closed comparable sales from outside the subject subdivision or project 4 P a g e
CONDOS-Full Review Full Review through Fannie CPM (Condo Project Manager) What documentation is required? It is not necessary to obtain Declarations and Bylaws on all loan files but may be required in certain circumstances (see below). Fannie Form 1076 (Full Form) must be completed by the HOA Master HOA Blanket Policy. o If the policy does not have walls in coverage, an HO6 policy is required as well (20% of appraised value coverage is required) an individual policy is required for detached units. (Fannie Mae section B7-3-04) HOA liability insurance for the entire project, including all common areas and elements, public ways, and any other areas that are under its supervision. o The amount of coverage must be at least $1 million for bodily injury and property damage for any single occurrence. See Fannie Mae Section B7-4-01 for specific requirements. Please note: Information required to meet Fannie guidelines may require obtaining the complete policy or email confirmation from the insurance agent as some required information is not always reflected on the insurance dec page-for example cancellation/modification requirements HOA projected budget must be provided and must reflect reserves of at least 10% of the budget (Fannie Mae Section B4-2.2-02) Fidelity Insurance is required for projects with more than 20 units. See Fannie Mae Section B7-4-02 for specific requirements. When will Declarations and Bylaws be required? Declarations and Bylaws will be required under certain circumstances such as: o Shared well and or septic that is maintained by the HOA, o PIW option is being exercised, or o In the event that the property type is in question. Declarations and Bylaws will be required for all Florida Condo properties (due to priority of common expense assessments requirements. Fannie Mae Section B4-2.1-02.) o Please note Fannie Mae and Freddie Mac differences: 5 P a g e
Fannie Mae: Florida permits 12 months of common expense assessments take priority to the 1 st lien which makes the property ineligible for Fannie Mae financing. Unless the Declarations specifically indicate that the HOA only allows 6 months the property is ineligible for Fannie Mae financing. Freddie Mac: Allows the 12 months in the state of Florida. (Freddie Mac Section 9701.10) o Declarations and Bylaws ARE required on all attached units in new projects or newly converted projects containing more than 4 units (Fannie Mae section B4-2.2-03) Other pertinent Fannie Mae information for Full Review Condos: Florida Condos located in new or newly converted projects are ineligible unless the project has been approved through Fannie Mae (PERS) (Fannie Mae section B4-2.2-04). Florida Condos in established projects have specific LTV restrictions See Fannie Mae Section B4-2.2-04 for further information For investment property transactions on attached units in established projects (including two- to four-unit projects), at least 50% of the total units in the project must be conveyed to principal residence or second home purchasers. o This requirement does not apply if the subject mortgage is for a principal residence or second home. o Financial institution-owned REO units that are for sale (not rented) are considered owner-occupied when calculating the 50% owner-occupancy ratio requirement. (Fannie Mae Section B4-2.2-02) Flood insurance can be included in HOA dues and does not need to be escrowed separately. A legal review of the project is required when the subject is an attached unit in a new or newly converted project. See guide section B4-2.2-03 Review for right of first refusal or legal review of the project on the subject when the project is considered established is not required (See Fannie Mae section B4-2.2-03). NEW projects and subdivisions require a comparable sale from within that project or subdivision in order to be eligible for secondary market financing. o Fannie will accept two pending sales (not listings) in lieu of one closed sale in the subject subdivision or project in the event closed sales are not yet available. When this flexibility is used, the appraiser must also provide at least three closed comparable sales from outside the subject subdivision or project 6 P a g e