![]() ![]() Following this be certain to have your attorney perform a thorough due diligence on the building. Freddie Mac Floating-Rate Loans are offered in 5, 7, and 10 year terms with. While there is not an absolute formula to hedge against some of these issues, you should always check with the bank your client is applying to and see if your building is on their approved list. These issues can prevent your deal from closing and the bank from funding a loan in the building your client desires. Freddie require that 10% of the annual budget be held in reserves.Ģ) The owner occupancy rate of a building being less than 51%.ģ) A single owner or entity owns more than 10% of the units in the building.Ĥ) The fidelity bond insurance is not high enough for the bank.ĥ) In new construction, less than 70% of the units are in contract.Ħ) The commercial space in the building occupies more than 20% of the square footage in the building.ħ) The building is subject to a current lawsuit (irrespective if they are the plaintiff or defendant). They consist primarily of:ġ) The reserve fund is not large enough. These are regulations that for the most part have been in place for years, but were not enforced during the peak of the market. Lenders need to comply with the new Fannie Mae and Freddie Mac requirements to maintain underwriting or funding the volume of mortgages. In addition to the standard due diligence that a buyer’s attorney should perform, we now also focus on the following building aspects which if not met, can result in the building not being approved by Fannie Mae and Freddie Mac. Lenders rely on Fannie Mae and Freddie Mac to purchase or guarantee their mortgages because it gives more liquidity for lenders, which then allows them to underwrite or fund more mortgages. While the New York City real estate market is a different animal from the rest of the Country, we are forced to comply with several of these regulations which do not necessarily pertain to our market or which several co-op/condo buildings do not meet.Īs a result, we are performing an even more thorough due diligence on buildings in the City than before. Therefore, the current regulations which banks are lending under are those enforced by Fannie Mae and Freddie Mac. Government subsidiaries Fannie Mae and Freddie Mac own the majority of residential mortgages in the Country.
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