February 2022

An informative e-newsletter for the Real Property Law Section of the State Bar of Michigan.

Surfside Aftershock: Condominium Underwriting Guidelines Change

By Gregory Gamalski, Bodman, PLC and Alexandra Dieck, Bodman, PLC

Most residential condominium loans are sold on the secondary market. Loan purchasers set underwriting guidelines for such loans. Loans on condominium units meeting the guidelines are commonly called “warrantable,” i.e. the lender can warrant that the guidelines are met. The guidelines most often affect new construction projects since phasing and presales affect the warranty. Until late 2021, long established projects were generally warrantable. But after the Surfside, Florida condominium collapse which killed 98 individuals on June 24, 2021, FNMA and other secondary market players have required that the condition of the project be included in underwriting for existing condominium projects. Site condominiums are not affected since for underwriting purposes those are considered single family subdivision equivalents.

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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice. IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication.