In the face of the new lending requirements, the spotlight on preventive maintenance within Homeowners' Associations (HOAs) has never been brighter. Beyond the visible benefits of aesthetics and safety, diligent common area maintenance and upkeep is now directly linked to financial viability and mortgage accessibility for condos and other communities.
The Crucial Connection Between Maintenance and Mortgage Eligibility:
Regular maintenance isn’t just about keeping up appearances; it’s a strategic imperative. With Fannie Mae and Freddie Mac’s recent mandate, associations must provide proof of well-maintained premises and address any critical repairs promptly. The absence of such care may lead to a classification of ineligibility for mortgage loans - in other words, you’ll be blacklisted.
Preventive Maintenance: A Financial Safety Net:
Preventive maintenance schedules serve as more than just operational checklists; they are financial safety nets. Comprehensive reserve studies and funding schedules, updated triennially, are not only required by the new guidelines but are also instrumental in demonstrating fiscal responsibility and preparedness for unexpected repairs.
The Ripple Effect on Property Value:
The implications of neglecting preventive maintenance are far-reaching. The inability to secure Fannie Mae and Freddie Mac-backed loans can significantly deter potential buyers, given the difficulty in obtaining alternative financing. This can lead to a cascading effect, diminishing the community’s value and desirability, among many other things.
A Call to Action for HOA Boards:
HOA boards must pivot towards a culture of consistent preventive maintenance through on-going monthly maintenance programs. In doing so, they not only uphold the integrity, safety, and appeal of their communities but also ensure their standing in a competitive mortgage market. The message is clear: maintenance is not just a duty—it’s an investment in the community’s future.
Key Points to Note:
Mandatory Documents: Be ready to present detailed insurance policies, transparent budgets, comprehensive financial reports, maintenance logs, inspection reports, and reserve studies. If your association is litigating or resolving disputes, you'll need to disclose this, too.
No Room for Delay: If critical repairs are on hold or special assessments are underway, your eligibility could be at risk. Keep in mind, if repairs exceed $10,000 per unit or over 15% of owners are behind on fees, the association might be ineligible for loans.
Reserve Studies Are Crucial: A thorough reserve study must be performed every three years to ensure financial stability. This isn't just a recommendation—it's a requirement.
Freddie Mac Lender Bulletin: https://guide.freddiemac.com/app/guide/bulletin/2023-15
Fannie Mae Lender Bulletin: https://singlefamily.fanniemae.com/media/36376/display