Tips on Filling Out the Fannie Mae/Freddie Mac Questionnaire

Steve Black

Effective early this year Fannie Mae and Freddie Mac, the two largest purchasers of residential real estate mortgages from lenders, started requiring information regarding the structural integrity and plans for addressing deferred maintenance for almost all condominium buildings. This is in direct response to the tragedy of the partial collapse of the Champlain Towers in Florida.

Is the Association legally obligated to complete the questionnaire?

Unless the governing documents of the Association require it (which is highly unlikely) the Association is not obligated to complete the questionnaire; however, not filling out the questionnaire will almost certainly result in 60-70% of potential buyers not being able to purchase units in the condominium. This will almost certainly result in lower selling prices for units which will cause overall property values to drop, possibly a substantial amount.

Do you have to fill out the form provided, or are there options to providing information another way?

There is no obligation to complete the form provided.  You will see below several suggestions on how you can respond to most questions without a Yes or No answer, but instead with Association documents and records.

There is a strong argument that instead of directly responding to the specific questionnaire, an association may provide association documentation for the bank to review and determine if it satisfies the bank’s criteria for giving the loan to the buyer and selling that loan to Fannie Mae/Freddie Mac.

Of course, if the board of directors or manager have actual knowledge of a structural issue that must absolutely be disclosed in as much detail is known, but don’t guess.

Then create a packet of documents of 6 to 12 months of membership meeting minutes and board of director meeting minutes, budgets for the last three years, the basic financials for the last three years (profit loss, balance sheet, income expense statement), and if available any audit and reserve study. In the unlikely event the association has some type of engineering or inspection include that information.

Providing this packet gives the lender an opportunity to review the status of the association without the association unknowingly making dangerous representations regarding structural integrity and deferred maintenance. In other words, the bank can review the information provided and decide if the association meets the Fannie Mae and Freddie Mac criteria. 

In every situation, the association should work with its association attorney to create a cover letter that includes significant disclaimer language. This cover letter should be included with every response to the lender regarding the questionnaire.

Our experience explained above is that the information and limited responses provided above have been sufficient for lenders to approve loans. Of course, that could change in the future and if it does t it is foreseeable that a visual inspection from an engineer and/or a reserve study within the past three years is going to be required. The board of directors should begin planning for and saving for those two additional steps now.

The new Fannie Mae and Freddie Mac Condominium questionnaires are new, request substantial information, and there is very little guidance from those organizations or in the law on how to fill them out. Hopefully this blog will provide helpful suggestions for responding to the new questionnaires. If you have any questions please speak with your associations attorney or feel free to contact one of the community association attorneys here at Law Firm Carolinas.

HOA & Condo Associations Real Estate