What are the requirements for a warrantable condo?

Warrantable condo eligibility requires a project to meet Fannie Mae's baseline standards for completion, financial health, occupancy, physical condition, and legal structure — with lender-specific overlays that may tighten or, for non-warrantable programs, relax certain thresholds.

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Guideline Requirements — Fannie Mae Baseline

1. Project Completion and Status

For a project to be classified as an established condo project, all of the following must be true per the Fannie Mae Selling Guide Fannie Mae:

• At least 90% of the total units have been conveyed to unit purchasers
• The project is 100% complete, including all units and common elements
• The project is not subject to additional phasing or annexation
• Control of the HOA has been turned over to the unit owners

For new condo projects (Full Review required), at least 50% of the total units in the project or subject legal phase must have been conveyed or be under contract for sale to principal residence or second home purchasers Fannie Mae

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2. HOA Delinquency

Per the Fannie Mae Selling Guide Full Review requirements Fannie Mae: "No more than 15% of the total units in a project are 60 days or more past due on common expense assessments (also known as HOA fees)." This same 15% threshold applies to delinquency on each special assessment.

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3. HOA Replacement Reserves

Per the Fannie Mae Selling Guide Fannie Mae: "Lenders must review the HOA projected budget to determine that it is adequate... and provides for the funding of replacement reserves for capital expenditures and deferred maintenance that is at least 10% of the budget."

• A reserve study may substitute for the 10% calculation if it demonstrates the project has adequate funded reserves equivalent to Fannie Mae's standard.

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4. Owner-Occupancy (Investment Property Transactions)

Per the Fannie Mae Selling Guide Fannie Mae: "For investment property transactions in established projects at least 50% of the total units in the project must be conveyed to principal residence or second home purchasers. This requirement does not apply if the subject mortgage is for a principal residence or second home."

• REO units held for sale (not rented) by financial institutions count as owner-occupied for this calculation.

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5. Legal Document Requirements

Per the Fannie Mae Selling Guide Fannie Mae:

• No provision of the condo project documents may give a unit owner or any other party priority over the rights of the first mortgagee
• Project documents must give the mortgagee the right to timely written notice of condemnations, casualty losses, assessment delinquencies, insurance lapses, and proposed actions requiring mortgagee consent
• Amendments of a material adverse nature to mortgagees must be agreed to by mortgagees representing at least 51% of votes of unit estates subject to mortgages

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6. Physical Condition / Critical Repairs

Projects in need of critical repairs are ineligible. Per the Fannie Mae Selling Guide and reflected in Mega Capital (DSCR) overlay, ineligible conditions include Mega Capital: "Material deficiencies, which if left uncorrected, have the potential to result in or contribute to critical element or system failure within one year; Any mold, water intrusions or potentially damaging leaks to the project's building(s); Advanced physical deterioration; Any unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months."

• A project with an active evacuation order is ineligible until remediated.

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7. Project Review Methods

The Fannie Mae Selling Guide identifies the following acceptable review types Mega Capital:

• Limited Review — Available for attached units in established projects
• Full Review — Required for new/newly converted projects and cases ineligible for limited review
• CPM (Condo Project Manager) Approval — Satisfies the review requirement when the project has a valid, unexpired FNMA certification as of the Note date
• PERS (Project Eligibility Review Service) — Fannie Mae-level approval; required for some newly converted non-gut rehabilitation projects with more than 4 units

Project review is waived (no review required) for Fannie Mae:

• Detached condo units
• Units in 2-to-4-unit condo projects
• Units in PUD projects
• Fannie Mae-to-Fannie Mae limited cash-out refinances (max 80% LTV)

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8. Florida-Specific LTV Restrictions

Per the Fannie Mae Selling Guide Fannie Mae:

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Ineligible Project Characteristics

Fannie Mae will not purchase loans secured by units in projects with a status of "Unavailable" in CPM Fannie Mae Additional ineligible characteristics per confirmed lender overlays JMAC Lending:

• Timeshares or projects restricting the owner's ability to occupy
• Houseboat projects
• Manufactured home projects (unless PERS-approved)
• Assisted living / continuing care facilities
• Projects where the developer retains ownership of common/limited elements and leases them back to the HOA
• Projects with non-conforming zoning that cannot be rebuilt to current density
• Projects requiring private transfer fees that do not benefit the association
• Projects in need of critical repairs or with significant deferred maintenance
• Any project in litigation involving safety, structural soundness, habitability, or functional use

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Lender Overlays / Matrix

HOA Delinquency Thresholds

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Single Entity Ownership

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Investor Concentration

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Commercial Space

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Exceptions or Alternative Paths — Litigation

Per the Fannie Mae Selling Guide, projects where the HOA or developer is named in litigation involving safety, structural soundness, habitability, or functional use are ineligible. Projects with minor matters having no impact on those factors may be eligible AmWest

Several non-warrantable lender overlays allow limited litigation exceptions, subject to the following condition: "Pending litigation may be accepted on a case-by-case basis. Litigation that involves structural issues, health and safety issues or items that will impact the marketability of the project will not be accepted. Potential damages do not exceed 25% of the HOA reserves OR documentation must be provided by the insurance carrier... that the insurance carrier has agreed to provide the defense and the association's insurance policy is sufficient to cover the litigation." JMAC Lending

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Documentation / Evidence Expectations — Insurance

Per the Windsor Mortgage Correspondent Manual and Fannie Mae guidelines:

• Master condo insurance policy must provide at least $1 million in liability coverage
• 100% replacement cost coverage for the complete project and unit (interior and exterior)
• Severability of interest clause required
• Fidelity bond required for projects with more than 20 units
• If the master policy does not cover walls-in, borrower must carry HO-6 coverage for flooring, wall coverings, cabinets, fixtures, and improvements

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Core Warrantability Checklist