Condo project eligibility is not just about the individual unit or the borrower. The financial health of the entire homeowners association determines whether the project qualifies for agency financing. HOA delinquency rates are a primary filter and one of the first items to verify before committing to a condo purchase or refinance.
The 15% Delinquency Threshold
Fannie Mae requires that no more than 15% of total units in a condo project be 60 days or more delinquent on HOA assessments. This threshold applies to both Limited Review and Full Review project eligibility. Freddie Mac has the same 15% cap. A project where 20 out of 100 units are delinquent on dues is not eligible for standard delivery to either agency, regardless of how strong the individual borrower's file is.
How to Get the Delinquency Data
The HOA questionnaire is the primary source. Lenders require the questionnaire to be completed by the HOA management company or board. The questionnaire asks for total number of units, number of units delinquent 30 days and 60 days, pending special assessments, litigation status, owner-occupancy percentage, and reserve fund status. Some lenders have their own questionnaire forms; others accept the standard Fannie Mae or Freddie Mac versions.
What Happens When Delinquency Exceeds 15%
The project is ineligible for standard agency delivery. The MLO has two options: find a non-warrantable condo lender who accepts projects with elevated delinquency (at higher rates and with more restrictive terms), or inform the borrower that the property is not currently financeable through standard programs. Some non-warrantable lenders accept projects up to 30% or 35% delinquency with compensating equity and borrower strength.
Aria can walk through the full condo project eligibility questionnaire requirements for Fannie Mae, Freddie Mac, and FHA and help identify what triggers ineligibility. Ask at vicariointel.com.
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