Full Review Eligibility Requirements
When determining the eligibility of a condo project on the basis of a Full Review, underwriters must ensure the condo project meets the eligibility requirements described in the following table.
The project meets the Requirements Applicable to All Properties in a Condo, or PUD Project described in General Information on Project Standards.
The project must not be an ineligible project. (See Ineligible Projects.)
No more than 15% of the total units in a project may be 60 days or more past due on common expense assessments (also known as HOA fees). For example, a 100–unit project may not have more than 15 units that are 60 days or more past due.
This ratio is calculated by dividing the number of units with common expense assessments that are past due by 60 or more days by the total number of units in the project.
Underwriters must review the HOA projected budget to determine that it
is adequate (that is, it includes allocations for line items pertinent to the type of condo project), and
provides for the funding of replacement reserves for capital expenditures and deferred maintenance that is at least 10% of the budget.
To determine whether the association has a minimum annual budgeted replacement reserve allocation of 10%, the underwriter must divide the annual budgeted replacement reserve allocation by the association’s annual budgeted assessment income (which includes regular common expense fees).
The following types of income may be excluded from the reserve calculation:
incidental income on which the project does not rely for ongoing operations, maintenance, or capital improvements;
income collected for utilities that would typically be paid by individual unit owners, such as cable TV or Internet access;
income allocated to reserve accounts; and
special assessment income.
The underwriter may use a reserve study in lieu of calculating the replacement reserve of 10% provided the following conditions are met:
the underwriter obtains a copy of an acceptable reserve study and retains the study and the underwriter’s analysis of the study in the project approval file,
the study demonstrates that the project has adequate funded reserves that provide financial protection for the project equivalent to Homium’s and FNMA standard reserve requirements,
the study demonstrates that the project’s funded reserves meet or exceed the recommendations included in the reserve study, and
the study meets Homium and FNMA’s requirements for replacement reserve studies listed at the end of this section.
For projects in which the units are not separately metered for utilities, the underwriter must
determine that having multiple units on a single meter is common and customary in the local market where the project is located, and
confirm that the project budget includes adequate funding for utility payments.
The project must be located on contiguous parcels of land. It is acceptable for a project to be divided by public or private streets.
The structures within the project must be within a reasonable distance from each other.
Common elements and facilities, such as recreational facilities and parking, must be consistent with the nature of the project and competitive in the marketplace.
Unit owners in the project must have the sole ownership interest in, and rights to the use of the project’s facilities, common elements, and limited common elements, except as noted below.
Shared amenities are permitted only when two or more HOAs share amenities for the exclusive use of the unit owners. The associations must have an agreement in place governing the arrangement for shared amenities that includes the following:
a description of the shared amenities subject to the arrangement;
a description of the terms under which unit owners in the project may use the shared amenities;
provisions for the funding, management, and upkeep of the shared amenities; and
provisions to resolve conflicts between the associations over the amenities.
Examples of shared amenities include, but are not limited to, clubhouses, recreational or fitness facilities, and swimming pools.
The developer may not retain any ownership interest in any of the facilities related to the project. The amenities and facilities—including parking and recreational facilities—may not be subject to a lease between the unit owners or the HOA and another party. Parking amenities provided under commercial leases or parking permit arrangements with parties unrelated to the developer are acceptable.
Homium permits the financing of a single or multiple parking space(s) with the mortgage provided that the parking space(s) and subject unit are included on one deed as evidenced on the legal description in the mortgage. In such cases, the LTV, CLTV, and HCLTV ratios are based on the combined value of the residential unit and the parking space(s).
Phase I and II environmental hazard assessments are not required for condo projects unless the underwriter identifies an environmental problem through the performance of its project underwriting or due diligence.
In the event that environmental problems are identified, the problems must be acceptable, as described in Suggested Format for Phase I Environmental Hazard Assessments.
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