Chapter 21

Condominium Properties

Section 2101

Eligible Mortgage Loans

Requirements

For any CondominiumCondominiumStatutorily 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. PropertyPropertyMultifamily 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 DocumentsCondominium 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 DocumentCondominium 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 CondominiumResidential CondominiumCondominium Property where all units are residential. where the BorrowerBorrowerPerson who is the obligor per the Note. owns:
      • 100% of the units (i.e., a Wholly-Owned CondominiumWholly-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 CondominiumFractured CondominiumResidential Condominium Property where the Borrower owns less than 100% of the units. ); or
    • Commercial CondominiumCommercial 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 BorrowerBorrowerPerson who is the obligor per the Note. owns 100% of the residential units but does not own any other unit;
  • ensure each CondominiumCondominiumStatutorily 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. PropertyPropertyMultifamily 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 PropertyPropertyMultifamily 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 CondominiumCondominiumStatutorily 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 DocumentsCondominium 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 BorrowerBorrowerPerson who is the obligor per the Note. are subordinate to the Mortgage LoanMortgage 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. ;
    • the BorrowerBorrowerPerson who is the obligor per the Note. is:
      • complying with all Condominium DocumentsCondominium 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 CondominiumCondominiumStatutorily 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. PropertyPropertyMultifamily 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 PropertyPropertyMultifamily 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 FileServicing FileYour file for each Mortgage Loan serviced. .
Section 2102

Control

Requirements

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

Complete control to directly or indirectly manage and operate the CondominiumCondominiumStatutorily 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. PropertyPropertyMultifamily 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:
    • CondominiumCondominiumStatutorily 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 DocumentCondominium 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 PersonPersonLegal 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 CondominiumCondominiumStatutorily 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:
    • CondominiumCondominiumStatutorily 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 AmendmentMaterial 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 DocumentsCondominium 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 DocumentsCondominium 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…:
    • CondominiumCondominiumStatutorily 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
      • BorrowerBorrowerPerson who is the obligor per the Note. -owned CondominiumCondominiumStatutorily 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 CondominiumCondominiumStatutorily 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 CondominiumCondominiumStatutorily 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 2103

Loan Documents

Requirements

Loan Documents
For a... You must ensure execution of...
Wholly-Owned CondominiumWholly-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).