Fannie Mae will soon loosen restrictions on its condominium loan buying guidelines. Among the planned changes is the acceptance of FHA project approvals.
The secondary lender announced Wednesday that it will revise its condominium guidelines to include a more straightforward process for condominium project approval and more flexible eligibility criteria, such as reduction of some presale requirements and a loosening of investor concentration limitations. The changes are slated to take effect this quarter.
The updates are "in response to lenders who said clearer, more concise project approval guidelines would help them originate more condominium loans," Fannie reported. The revised standards will allow more lenders to provide condo financing and increase Fannie approval of condo projects in smaller markets.
"Condominiums are a first step to homeownership for many first-time buyers, and are a more affordable housing option in many high-cost areas," said Tom Lund, head of Fannie's single-family business. "These updated condominium guidelines will ease the process for obtaining Fannie Mae acceptance for condo projects, which should ultimately benefit home buyers seeking financing on condo units."
Fannie will make changes to four guideline categories, based on the four processes by which a single-family mortgage loan secured by a condominium unit will be approved for purchase.
The Limited Review category, or the most streamlined way to gain approval to deliver Fannie a condo loan, through the company's automated underwriting system, will be expanded with broader eligibility criteria.
A new lender-delegated review category, Expedited Review, will be supported by a new web-based online lender registration and project management system.
For projects not eligible for Expedited Review, the Fannie Mae (1028) Review process will be simplified, with reduced presale requirements on certain projects and increased allowable investor concentrations.
The fourth change will be that Fannie will be accepting most FHA condominium project approvals without requiring a separate project acceptance from Fannie.
Details of the updates will be provided in the Fannie Mae Selling Guide announcement to be issued in May, when training on the new condo guidelines and the new project management system will also be available to lenders.