Chapter 20

Condominium Properties

Section 2001

Eligible Mortgage Loans

Requirements

For any Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , you must:

  • evaluate the Condominium Documents Condominium DocumentsGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… for compliance with the Condominium Document Condominium DocumentGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… Review Checklist ( Form 6498 );
  • determine if it is a:
    • Residential Condominium Residential CondominiumCondominium Property where all units are residential. where the Borrower BorrowerPerson who is the obligor per the Note. owns:
      • 100% of the units (i.e., a Wholly-Owned Condominium Wholly-Owned CondominiumResidential Condominium Property where the Borrower owns 100% of the units. ); or
      • less than 100% but at least 80% of the units (i.e., a Fractured Condominium Fractured CondominiumResidential Condominium Property where the Borrower owns less than 100% of the units. ); or
    • Commercial Condominium Commercial CondominiumMixed-use Condominium Property combining Borrower-owned multifamily residential units with 1 or more other uses (e.g., retail, hotel, office, etc.) which may not be Borrower-owned. where the Borrower BorrowerPerson who is the obligor per the Note. owns 100% of the residential units but does not own any other unit;
  • ensure each Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). unit:
    • is a separate tax parcel; and
    • has a separate tax bill;
  • confirm:
    • the entire Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is subject to the Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. regime;
    • all assessments and payments due per the Condominium Documents Condominium DocumentsGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… are current;
    • future assessments and payments from the Borrower BorrowerPerson who is the obligor per the Note. are subordinate to the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 ;
    • the Borrower BorrowerPerson who is the obligor per the Note. is:
      • complying with all Condominium Documents Condominium DocumentsGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… ; and
      • not involved in any Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). disputes that may
        • result in material litigation, or
        • materially adversely impact the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and
  • retain Form 6498  in your Servicing File Servicing FileYour file for each Mortgage Loan serviced. .
Section 2002

Control

Requirements

Control Requirements
For a... To be eligible for Delivery, you must ensure the Borrower has...
Wholly-Owned Condominium Wholly-Owned CondominiumResidential Condominium Property where the Borrower owns 100% of the units.

Complete control to directly or indirectly manage and operate the Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , through voting rights, consent rights, or ownership, to control all:

 

  • voting outcomes; and
  • actions taken, including for:
    • Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. termination;
    • Condominium Document Condominium DocumentGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… amendments;
    • assessments and budgets;
    • insurance requirements; and
    • post casualty or condemnation:
      • restoration and repair; and
      • proceeds or award application.
Fractured Condominium or Commercial Condominium

Material control (including the requisite votes in any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). directly or indirectly governing the Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. ), either individually or with its mortgagee, to:

 

  • prevent:
    • Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. termination; and
    • any Material Amendment Material AmendmentChange to the Condominium Documents pertaining to: modifying, after a casualty or condemnation, insurance requirements, use of insurance proceeds, or rebuild requirements; altering or restricting the use of the Condominium units, common elements, or other… to the Condominium Documents Condominium DocumentsGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… ; and
  • require, either directly or per the Condominium Documents Condominium DocumentsGoverning documents: for the Condominium and owners’ association’s creation, operation, and management; and including Condominium instruments for Condominium governance, such as declarations, plats, bylaws, rules and regulations,  articles of… :
    • Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. repair and restoration, including common elements, for any casualty or condemnation damage equal to 80% or less of either the
      • common elements, or
      • Borrower BorrowerPerson who is the obligor per the Note. -owned Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. units; and
    • for any casualty or condemnation neither repairable nor restorable, timely distribution of insurance or condemnation proceeds to Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. unit owners.

Guidance

Condominium Document Review
Topic You should review the Condominium Documents to evaluate...
Governing Body

Membership

 

  • composition,
  • appointment, and
  • removal.
Voting

Thresholds for

 

  • making decisions,
  • amending documents, and
  • terminating the condominium structure.
Association
  • Responsibilities for
    • collecting fees,
    • managing maintenance tasks,
    • obtaining adequate insurance, and
    • mediating disputes.
  • Requirements and restrictions for
    • operations,
    • physical appearance,
    • common area alterations,
    • unit alterations, and
    • rebuilding.
Assessment Fees

Provisions for

 

  • establishment,
  • escalation, and
  • special assessments.
Common Areas

Use of

 

  • shared amenities, 
  • ingress/egress, and
  • parking.
Financials

Reasonableness of

 

  • annual budget,
  • 3 years Condominium CondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. income/expense statements, and
  • reserves.
Insurance Proceeds and Condemnation Awards

How funds are

 

  • held,
  • applied, and
  • disbursed.
Covenant Enforcement

Ability to, and history of,

 

  • levying fines, 
  • collecting interest, and/or
  • placing and foreclosing liens.
Insurance

Coverage for

 

  • property (e.g., accidents, fire, equipment failure, flood, wind, etc.),
  • liability (personal injury), and
  • director’s and officer’s (e.g., theft, fraud, etc.).
Section 2003

Loan Documents

Requirements

Loan Documents
For a... You must ensure execution of...
Wholly-Owned Condominium Wholly-Owned CondominiumResidential Condominium Property where the Borrower owns 100% of the units.
  • Modifications to Multifamily Loan and Security Agreement (Condominium Provisions) ( Form 6202 ); and
  • Modifications to Security Instrument (Condominium Subordination) ( Form 6304 ).
Fractured Condominium or Commercial Condominium
  • Modifications to Multifamily Loan and Security Agreement (Fractured/Commercial Condominium Provisions) ( Form 6258 );
  • Estoppel Certificate attached to Form 6258 , executed by the condominium association;
  • Modifications to Security Instrument (Condominium Subordination) ( Form 6304 ); and
  • Guaranty of Non-Recourse Obligations ( Form 6015 ).