New York City condo buildings where buyers tend to rely on conventional financing face a looming deadline. New, stricter lending guidelines are going into effect with the potential to limit mortgage eligibility, shaking up many condo buildings across the city.
The new guidance from Fannie Mae and Freddie Mac issued in March applies to condo buildings only and has several significant changes, including the end of the limited review process by lenders, a shortcut to the underwriting procedure that requires less documentation. After August 3rd, most condo transactions will require the full review process, meaning lengthy documentation via condo questionnaires, which has the potential to slow down deals.
Another major shift involves how much buildings set aside to pay for major capital repairs. Effective January 4th, 2027, Fannie Mae and Freddie Mac, the U.S.-backed entities that buy loans from banks, will increase the minimum reserve funding requirement from 10 percent to 15 percent of the annual budget—a number that many buildings will find astronomical or antithetical to how they operate. Many NYC buildings raise assessments to fund major work, for example, when a new roof or façade repair is needed; a major façade project can run as high as $1 million…