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“Because of the fatal collapse of the Champlain Towers South condo complex in Surfside, Fla., in June 2021, government-sponsored mortgage buyers Fannie Mae and Freddie Mac have “temporarily’’ changed their requirements for loan approval — changes that could mean delayed closings and higher interest rates. Attached condos in a building that has at least five units and “significant deferred maintenance’’ or violations “are not eligible for purchase,’’ a letter Fannie Mae sent to lenders in October states.
A Freddie Mac spokesperson said properties that are not compliant with a state-mandated inspection or certification have not been eligible for purchase by the agency for years and that the new guidance only underscores that ineligibility. Freddie Mac and Fannie Mae own roughly half of the mortgages in the United States at any given time, and they generally keep mortgage interest rates lower than the market rate.
On condominium loans, the spokesman said, the agencies rely on lenders to find out from the condominium association whether or not the building is in compliance with all applicable laws.
Before the Surfside collapse, lenders were asking whether there were any building violations, said Chris Malloy, a lawyer and a principal and founding member of Moriarty, Troyer & Malloy in Boston. But “now you have to show the lenders proof that you’ve had the fire escape inspected.’’ “