Revised and Simplified Condominium Eligibility Requirements in Guide Bulletin 2012-14
July 11, 2012
If you sell Condominium Unit Mortgages to Freddie Mac, you’ll find that we have streamlined and simplified our eligibility and warranty requirements in our newly restructured Chapter 42 of the Single-Family Seller/Servicer Guide (Guide). Today’s Guide Bulletin 2012-14 announces the reorganization of Guide Chapter 42, Special Requirements for Condominiums, to streamline our condominium requirements, reflect industry practices for condominium project reviews, and simplify the presentation of these requirements in the Guide.
The Bulletin also announces revisions to certain requirements for reciprocal project reviews, other condominium projects, condominium project conversions, and flood insurance coverage for condominiums.
If you are a Freddie Mac Servicer, the new supplemental coverage requirement for condominium flood insurance may impact the mortgages you service for Freddie Mac.
Originate & Underwrite
Effective for mortgages with delivery dates on or after December 1, 2012:
- Guide Chapter 42, Special Requirements for Condominiums, restructured. Guide Chapter 42 has been reorganized in a sequential format to reduce the need to reference multiple sections of the chapter when evaluating for mortgage and project eligibility. The restructuring of Chapter 42 includes the following:
- Consolidating project review requirements and project type glossary terms into self-contained project review sections in Chapter 42.
- Deleting Section 42.11, Additional Seller Condominium Project Warranties. Certain key warranties in this section have been incorporated in the appropriate sections for project status type.
- Converting certain warranties to eligibility requirements to be more specific in our project eligibility and review requirements.
- Removing our defined term for a “Newly-converted Condominium Project” and updating our requirements related to condominium project conversions now listed under Guide section 42.6, New Condominium Projects.
- Renaming Chapter 42 Special Requirements for Condominiums to reflect these changes.
- Updated requirements for reciprocal reviews. To make it easier for you to take advantage of our reciprocal review offering, we’ve simplified our requirements for mortgages with project approvals obtained through other secondary market participants.
- Revised requirements for other condominium projects. As a result of the restructuring of Chapter 42, the eligibility requirements for detached and mixed-use condominium projects have been streamlined.
Sell & Deliver and Servicing
Revised flood insurance requirements. We are updating our flood insurance requirements for mortgages you originate and service to allow borrowers to provide supplemental coverage if the condominium owners association’s coverage for the building that houses the subject unit does not meet the flood insurance requirements in Guide Section 58.3(c):
- Effective immediately, we are allowing the borrower to maintain supplemental coverage on the subject unit provided the requirements outlined in Section 58.3(c)2 are met.
- Effective for mortgages delivered on or after December 1, 2012, if the condominium association’s coverage for the building that houses the subject unit is not at least equal to the lower of 80 percent of the building’s replacement cost or $250,000 multiplied by the number of units in the building, the mortgage is not eligible for sale to Freddie Mac. This revised requirement does not apply to Freddie Mac Relief Refinance MortgagesSM.
For a complete understanding of these changes, it is important that you read Guide Bulletin 2012-14 and carefully review the updated version of Guide Chapters 42 and 58 as several requirements have been relocated and/or updated.
While most of these changes are not effective until December 1, 2012, you may begin adopting them immediately.