Freddie Mac Single-Family Seller/Servicer Guide 5701.1 — Seller’s assessment of Condominium Project risks; terms used in this chapter

This section contains: ■ Seller’s assessment of Condominium Project risks ■ Glossary definitions and other terms used in this chapter

(a) Seller’s assessment of Condominium 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 Common Elements 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. For information on requesting Freddie Mac to consider a waiver of its project eligibility requirements, see Section 5701.11.

(b) Glossary definitions and other terms used in this chapter (i) Glossary definitions for Condominium Projects and unit type The Seller should be familiar with the Glossary definitions of the following terms: Glossary definitions for Condominium Projects and unit type D 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. E 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 ■ At least 75% of the total units in the project have been conveyed to the unit purchasers, and ■ The unit owners control the homeowners association N 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 ■ Fewer than 75% of the total number of units in the project must have been conveyed to the unit purchasers, or Glossary definitions for Condominium Projects and unit type ■ The developer has not turned control of the homeowners association over to the unit owners # 2- to 4-Unit Condominium Project A project that is comprised of at least two but no more than four units that are each separately deeded with separate legal descriptions. The units may be attached, detached or semidetached units or a mixture of attached, detached and/or semidetached units. The units may also be a mixture of residential units and no more than one commercial unit. 5- to 10-Unit Condominium Project A project that is comprised of at least five but no more than 10 units that are each separately deeded with separate legal descriptions. The units may be attached, detached or semidetached units or a mixture of attached, detached and/or semidetached units. The units may also be a mixture of residential units and commercial units. (ii) Glossary definitions for Critical Repairs and Routine Repairs The Seller should be familiar with the Glossary definitions of the following terms: Glossary definitions for Critical Repairs and Routine Repairs C Critical Repairs (includes material deficiencies and significant deferred maintenance) Repairs and replacements that significantly impact the safety, soundness, structural integrity or habitability of the project’s building(s) and/or that impact unit values, financial viability or marketability of the project. These include: ■ Material deficiencies which, if left uncorrected, have the potential to result in or contribute to critical element or system failure within one year ■ Any mold, water intrusions or potentially damaging leaks to the project’s building(s) that have not been repaired ■ Advanced physical deterioration ■ Any project that failed to pass state, county, or other jurisdictional mandatory inspections and/or certifications specific to structural soundness, safety, and habitability; or ■ Any unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months (does not include repairs made by the unit owner or repairs funded through a special assessment) Examples of some items to consider include, but are not limited to, sea walls, elevators, waterproofing, stairwells, balconies, foundation, electrical systems, parking structures or other loadbearing structures. R Routine Repairs These repairs are not considered to be critical and include work that is: ■ Preventative in nature or part of normal capital replacements (e.g., focused on keeping the project fully functioning and serviceable); and ■ Accomplished within the project’s normal operating budget or through special assessments that are within guidelines (iii) Other terms used in this chapter The following additional terms are used in this chapter: Additional defined terms C Condo Project Advisor® Feedback Certificate The printed or printable document returned by Condo Project Advisor that details the approval of a Project Waiver Request (PWR) submission or details the Project Assessment Request (PAR) findings. H 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.