5701.1: Seller's assessment of project risks; terms used in this chapter (11/05/18)

(a) Seller's assessment of project risks
Freddie Mac requires a Condominium Project review to address certain project risks including, but not limited to, the marketability and condition of the project, the marketability of the units within the project, the financial stability and viability of the project, project-level litigation, restrictions on unit owners' rights to occupy the unit, ownership and use of the project common areas and amenities and the adequacy of insurance coverage to protect the project from damage and loss.
Freddie Mac expects the Seller to have staff that is experienced and knowledgeable about Condominium Project risks and to place as much emphasis on the adequacy of the property as collateral as it does on underwriting the Borrower's creditworthiness. The quality of a Mortgage secured by a unit in a Condominium Project can be impacted by the financial stability and viability of the particular project, among other project characteristics. The conclusion that a Mortgage is acceptable to Freddie Mac must be based on the determination that the Borrower is creditworthy and the Mortgaged Premises is adequate collateral for the Mortgage transaction.
If a Seller determines that an Established Condominium Project does not meet certain Freddie Mac project eligibility requirements and concludes that the Mortgaged Premises is still adequate collateral for the Mortgage transaction, then the Seller may request that Freddie Mac consider a waiver. See Section 5701.1(c) for information on requesting Freddie Mac to consider a waiver of its project eligibility requirements.
(b) Glossary definitions and other terms used in this chapter
(i) Glossary definitions: Condominium Projects and unit type
The Seller should be familiar with the Glossary definitions of the following terms:

Project/Unit Type	Glossary Definition
2- to 4-Unit Condominium Project	A project that is comprised of at least two but no more than four 1-unit dwellings that are each separately owned with separate legal descriptions. The units may be attached, detached or semi detached units or a mixture of attached, detached and/or semi detached units.
Detached Condominium Project	A Condominium Project comprised solely of Detached Condominium Units.
Detached Condominium Unit	A Condominium Unit that is completely detached from any other unit in a Condominium Project. A Detached Condominium Unit can be in a Detached Condominium Project or in a Condominium Project that contains a mixture of attached, detached and/or semi detached units.
Established Condominium Project	An Established Condominium Project is a Condominium Project in which: The Condominium Project (all Condominium Units, Common Elements and Amenities) and related facilities owned by any Master Association are complete and not subject to any additional phasing With respect to unit ownership: At least 75% of the total units in the project have been conveyed to the unit purchasers or If the project is a 2- to 4-Unit Condominium Project, all units in the project have been conveyed to the unit purchasers, and The unit owners control the homeowners association
New Condominium Project	A New Condominium Project is a Condominium Project in which: The Condominium Project (all Condominium Units, Common Elements and Amenities) and related facilities owned by any Master Association are not complete, or are subject to additional phasing, except that for 2- to 4-Unit Condominium Projects, all Condominium Units, Common Elements and Amenities of the Condominium Project are complete and not subject to any additional phasing Fewer than 75% of the total number of units in the project must have been conveyed to the unit purchasers, except that for 2- to 4-Unit Condominium Projects, all but one unit in the project must have been conveyed or must be under contract to the unit purchasers, or The developer has not turned control of the homeowners association over to the unit owners

(ii) Other Glossary definitionsThe Seller should also be familiar with Freddie Mac's Glossary definitions of the following terms:

Amenities
Common Elements
Condominium Hotel
Condominium Project
Condominium Unit
Condominium Unit Mortgage
Limited Common Elements
Project Documents

(iii) Other termsThe following additional terms are used in this chapter:

Term	Definition
Condo Project AdvisorSMFeedback Certificate	The printed or printable document returned by Condo Project Advisor that details the approval of a Project Waiver Request submission.
Gut Rehabilitation	The rehabilitation of an existing building(s) to its shell. The rehabilitation involves all new mechanical equipment (such as heating, exhaust, insulation, roofing, plumbing and electrical). The renovations include new interiors, fixtures, appliances, and flooring for individual units and common areas.
Homeowners Association (HOA)	A Homeowners Association is an association comprised of unit owners that maintains the Common Elements for the benefit of the unit owners. In a Condominium Project, the association has no ownership interest in the Common Elements.
Non-Gut Rehabilitation	The rehabilitation of an existing building(s) that does not involve substantial rehabilitation of the building(s) or individual units or the substantial replacement of mechanical equipment

(c) Freddie Mac Condo Project AdvisorSM

Freddie Mac Condo Project AdvisorSM, accessible through Freddie Mac Loan Advisor Suite®, allows authorized Sellers to submit a request for single loan exceptions (referred to as a Project Waiver Request (PWR)) for Established Condominium Projects that do not meet certain Condominium Project eligibility requirements. Approved PWRs are issued a Condo Project Advisor Feedback Certificate.

(i) General eligibility

(A) To be eligible for a PWR, a Condominium Unit Mortgage in an Established Condominium Project must comply with the applicable requirements in this Chapter 5701, except for the following Condominium Project eligibility categories:

1. Delinquent assessments – Section 5701.5(e)

2. Excessive commercial space – Section 5701.3(d)

3. Pending litigation – Section 5701.3(i)

4. Owner occupancy (referred to as 'Project Unit Occupancy' in Condo Project Advisor) – Section 5701.5(c)

5. Reserves for capital expenditures and deferred maintenance – Section 5701.5(d)

6. Excessive single investor concentration (referred to as 'Single Entity Ownership' in Condo Project Advisor) – Section 5701.3(j)

(B) The PWR may be submitted at any time during the loan origination process, but must be submitted prior to sale of the related Condominium Unit Mortgage to Freddie Mac

(C) An approved PWR is applicable to only the Mortgage identified on the Condo Project Advisor Feedback Certificate and is not applicable to any other Mortgage secured by a Condominium Unit located in the same Condominium Project. The Mortgage identified will be the Mortgage in connection with which the Seller enters one of the following in the "Enter ID/Key" field in Condo Project Advisor:

1. The Loan Product Advisor key alphanumeric identifier

2. The Fannie Mae Desktop Underwriter key alphanumeric identifier (referred to as Casefile ID in Desktop Underwriter), or

3. The Doc File ID alphanumeric identifier issued in connection with submission of the appraisal data to the Uniform Collateral Data Portal

(ii) Documentation requirements for Mortgages with approved PWRs

The Condo Project Advisor feedback certificate must be maintained in the applicable Mortgage file.

(iii) Representations and warranties

In connection with a Mortgage with an approved PWR, Freddie Mac will accept the Condo Project Advisor Feedback Certificate, and will not exercise its remedies, including the issuance of repurchase requests, in connection with a breach of the Seller's selling representations and warranties related to the Condominium Project review and eligibility requirements identified on the Condo Project Advisor Feedback Certificate. The Seller remains responsible for compliance with all other requirements of their Purchase Documents.

(iv) Delivery requirements

Condominium Unit Mortgages with approved PWRs, must be delivered to Freddie Mac within 180 days from the date of the Condo Project Advisor Feedback Certificate. If the Condominium Unit Mortgage is not delivered within 180 days from the date of the Condo Project Advisor Feedback Certificate, the Seller must submit a new PWR and obtain a new Condo Project Advisor Feedback Certificate prior to delivery.

(v) Condo Project Advisor licenseCondo Project Advisor is a "System" within the meaning of Section 2401.1, and as such, the Seller's use of Condo Project Advisor is licensed pursuant to the terms of Section 2401.1.