Surfside Condominium Tragedy Results In Stricter Fannie Mae And Freddie Mac Requirements

The Champlain Towers South, located in Surfside, Florida, partially collapsed on June 24, 2021. It resulted in 98 casualties and dozens of people who lost their homes. Preliminary investigations showed that design failure, low-grade construction, and lack of adequate and routine maintenance were likely the cause of the collapse. 

 

The tragedy was a cautionary tale for industries and stakeholders on the dangers of aging infrastructures and properties, highlighting the importance of adequate property condition assessment NJ. It also affects companies that manage, insure, finance, and regulate condominiums. In light of the Surfside condominium tragedy, the Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) released bulletins with new requirements for mortgages issued on condominiums. 

 

Fannie Mae and Freddie Mac are government-sponsored entities on mortgage affordability and availability. They are part of the secondary market, serving as intermediaries between private lenders and security investors. They also set the standards for mortgages, laying down guidelines that can influence customers’ borrowing terms. 

 

Freddie Mac’s Bulletin 2021-38, which applies to residential mortgages for condominiums, specified review requirements for projects that need critical repairs and projects with special assessments. It defines critical repairs as those that significantly impact the building’s safety, soundness, structural integrity, or habitability. It could also mean repairs and replacements that can affect unit values and the project’s financial viability. 

 

Meanwhile, Fannie Mae’s Lender Letter LL-2021-14 specified that the institution would no longer buy loans on condominiums and co-op projects with significant deferred maintenance or those that received a directive to make repairs because of unsafe property conditions. Significant deferred maintenance refers to those requiring a full or partial building evacuation for more than seven days to complete the repairs. This also includes defects, deficiencies, damage, or deferred maintenance that negatively affects the usual function of one or more major structural or mechanical elements. 

 

For more information, here is an infographic provided by Lockatong Engineering. The firm can help comply with various requirements, including a structural inspection and NJ reserve study to help financially plan any required structural improvements or maintenance.