Freddie Mac Single-Family Seller/Servicer Guide Section 5701.5 — Established Condominium Projects

Freddie Mac Single-Family Seller/Servicer Guide Section 5701.5 — Established Condominium Projects

5701.5: Established Condominium Projects (05/06/26) This section contains: ■ Project completion requirements for Established Condominium Projects ■ Project budget requirements for Established Condominium Projects ■ Delinquent assessments for Established Condominium Projects ■ Requirements when a Seller relies on a project reserve study for Established Condominium Projects ■ Requirements when an Established Condominium Project contains Manufactured Homes To be eligible for the Established Condominium Projects review type, the Condominium Project must meet the definition of an Established Condominium Project. If the Condominium Unit Mortgages or the Condominium Projects do not comply with the eligibility requirements for (i) Condominium Projects with a Project Certified status Project Assessment Request (PAR) finding (see Section 5701.10) or (ii) streamlined reviews (see Section 5701.4), the Mortgages must comply with all of the following eligibility requirements in addition to the project review and eligibility requirements in Section 5701.2. (a) Project completion requirements for Established Condominium Projects All units, Common Elements and Amenities must be complete. Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-25 (b) Project budget requirements for Established Condominium Projects The project’s budget for the current fiscal year must comply with the following: 1. Be consistent with the nature of the project 2. Appropriate assessments must be established to manage the project 3. There must be appropriate allocations for line items pertinent to the type and status of the Condominium Project 4. There must be adequate funding for insurance deductible amounts 5. At least 10% of the budget must provide funding for replacement reserves for capital expenditures and deferred maintenance based on the project’s age, estimated remaining life and replacement cost of major Common Elements Calculation of replacement reserve percentage Formula Exclusions The replacement reserve percentage is determined by dividing: (i) the annual budgeted replacement reserve allocation by (ii) the Homeowners Association’s (HOA’s) annual budgeted assessment income (including regular common expense fees) The calculation may exclude: i. Special assessment income ii. Income allocated to or in reserve accounts iii. Incidental income not relied upon for maintenance operations or capital improvements; and iv. Amounts collected from unit owners (but usually paid individually by them) for items or utilities such as internet access 6. A Seller may rely on a reserve study instead of the project budget providing a replacement reserve of at least 10%, provided the conditions in section (d) below are met 7. An HOA must not receive more than 10% of its budgeted income from the rental or leasing of commercial parking facilities (c) Delinquent assessments for Established Condominium Projects (i) HOA assessments Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-26 No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of their HOA assessments. (ii) Special assessments No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of each special assessment. (d) Requirements when a Seller relies on a project reserve study for Established Condominium Projects The reserve study must comply with the following requirements: 1. The reserve study generally must include: ■ An inventory of major components of the project; ■ Financial analysis and evaluation of current reserve fund adequacy; and ■ Proposed annual reserve funding plan 2. A reserve study’s financial analysis must validate that the project has appropriately allocated the recommended reserve funds to provide the Condominium Project with sufficient financial protection comparable to Freddie Mac’s standard budget requirements for replacement reserves 3. The reserve study’s annual reserve funding plan, which details total costs identified for replacement components, must meet or exceed the study’s recommendation and conclusion 4. The most current reserve study (or update) must be dated within 36 months of the Seller’s determination that a Condominium Project is eligible (see Section 5701.2(a)(3)) 5. The reserve study must be prepared by an independent expert skilled in performing such studies (such as a reserve study professional, a construction engineer, a certified public accountant who specializes in reserve studies or any professional with demonstrated experience and knowledge in completing reserve studies) 6. The reserve study must meet or exceed requirements set forth in any applicable state statutes 7. The reserve study must comment favorably on the project’s age, estimated remaining life, structural integrity and the replacement of major components If the Seller relies on a reserve study that meets the requirements of this section, the project’s budget must contain appropriate allocations to support the costs identified in the study. Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-27 The Seller must obtain and retain in the Mortgage file a copy of the reserve study. The Seller must also perform an analysis of the study and retain this analysis in the Mortgage file. (e) Requirements when an Established Condominium Project contains Manufactured Homes To be eligible: 1. The Mortgage must be secured by a Detached Condominium Unit 2. The subject Manufactured Home must not be a single-wide Manufactured Home 3. The subject Manufactured Home must meet the requirements in Chapter 5703 4. Although Section 5701.3(a) states otherwise, the Condominium Project’s unit owners must only have an undivided ownership interest in the land on which the project is located 5. The Condominium Project must not have campgrounds or other facilities for transient or mobile units For Condominium Unit Mortgages secured by Condominium Units located in Condominium Projects that contain Manufactured Homes that do not comply with these requirements, the projects must have an “Approved by Fannie Mae” status designation in Fannie Mae’s Condo Project ManagerTM (see Section 5701.9(a) for additional information) for the Mortgages to be eligible for sale to Freddie Mac. Note: If the requirements for Established Condominium Projects in this Section 5701.5 are met, then the Seller is not required to comply with the requirements for any of the other project review types in Sections 5701.4 (Streamlined reviews), 5701.6 (New Condominium Project reviews), 5701.7 (Exempt from review) and 5701.9 (Reciprocal project reviews). 5701.5: Established Condominium Projects (Future effective date 08/03/26) Effective for Mortgages with Application Received Dates on or after August 3, 2026. This section contains: ■ Project completion requirements for Established Condominium Projects Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-28 ■ Project budget requirements for Established Condominium Projects ■ Delinquent assessments for Established Condominium Projects ■ Requirements when a Seller relies on a project reserve study for Established Condominium Projects ■ Requirements when an Established Condominium Project contains Manufactured Homes To be eligible for the Established Condominium Projects review type, the Condominium Project must meet the definition of an Established Condominium Project. If the Condominium Project does not comply with the eligibility requirements for Condominium Projects with a Project Certified status Project Assessment Request (PAR) finding (see Section 5701.10), the Mortgage must comply with all of the following eligibility requirements in addition to the project review and eligibility requirements in Section 5701.2. (a) Project completion requirements for Established Condominium Projects All units, Common Elements and Amenities must be complete. (b) Project budget requirements for Established Condominium Projects The project’s budget for the current fiscal year must comply with the following: 1. Be consistent with the nature of the project 2. Appropriate assessments must be established to manage the project 3. There must be appropriate allocations for line items pertinent to the type and status of the Condominium Project 4. There must be adequate funding for insurance deductible amounts 5. At least 10% of the budget must provide funding for replacement reserves for capital expenditures and deferred maintenance based on the project’s age, estimated remaining life and replacement cost of major Common Elements Calculation of replacement reserve percentage Formula Exclusions The replacement reserve percentage is determined by dividing: (i) the annual budgeted replacement reserve allocation by (ii) the Homeowners Association’s The calculation may exclude: i. Special assessment income Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-29 Calculation of replacement reserve percentage Formula Exclusions (HOA’s) annual budgeted assessment income (including regular common expense fees) ii. Income allocated to or in reserve accounts iii. Incidental income not relied upon for maintenance operations or capital improvements; and iv. Amounts collected from unit owners (but usually paid individually by them) for items or utilities such as internet access 6. A Seller may rely on a reserve study instead of the project budget providing a replacement reserve of at least 10%, provided the conditions in section (d) below are met 7. An HOA must not receive more than 10% of its budgeted income from the rental or leasing of commercial parking facilities (c) Delinquent assessments for Established Condominium Projects (i) HOA assessments No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of their HOA assessments. (ii) Special assessments No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of each special assessment. (d) Requirements when a Seller relies on a project reserve study for Established Condominium Projects The reserve study must comply with the following requirements: 1. The reserve study generally must include: ■ An inventory of major components of the project; ■ Financial analysis and evaluation of current reserve fund adequacy; and ■ Proposed annual reserve funding plan Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-30 2. A reserve study’s financial analysis must validate that the project has appropriately allocated the recommended reserve funds to provide the Condominium Project with sufficient financial protection comparable to Freddie Mac’s standard budget requirements for replacement reserves 3. The reserve study’s annual reserve funding plan, which details total costs identified for replacement components, must meet or exceed the study’s recommendation and conclusion 4. The most current reserve study (or update) must be dated within 36 months of the Seller’s determination that a Condominium Project is eligible (see Section 5701.2(a)(3)) 5. The reserve study must be prepared by an independent expert skilled in performing such studies (such as a reserve study professional, a construction engineer, a certified public accountant who specializes in reserve studies or any professional with demonstrated experience and knowledge in completing reserve studies) 6. The reserve study must meet or exceed requirements set forth in any applicable state statutes 7. The reserve study must comment favorably on the project’s age, estimated remaining life, structural integrity and the replacement of major components If the Seller relies on a reserve study that meets the requirements of this section, the project’s budget must contain the highest recommended reserve allocation amount in the study to support the costs identified in the study. Reserve studies that establish a reserve funding goal that allows the reserve cash balance to approach but never fall below zero during the cash flow projection, referred to as baseline funding method, must not be used to waive the 10% reserve requirement. The Seller must obtain and retain in the Mortgage file a copy of the reserve study. The Seller must also perform an analysis of the study and retain this analysis in the Mortgage file. (e) Requirements when an Established Condominium Project contains Manufactured Homes To be eligible: 1. The Mortgage must be secured by a Detached Condominium Unit 2. The subject Manufactured Home must not be a single-wide Manufactured Home 3. The subject Manufactured Home must meet the requirements in Chapter 5703 Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-31 4. Although Section 5701.3(a) states otherwise, the Condominium Project’s unit owners must only have an undivided ownership interest in the land on which the project is located 5. The Condominium Project must not have campgrounds or other facilities for transient or mobile units For Condominium Unit Mortgages secured by Condominium Units located in Condominium Projects that contain Manufactured Homes that do not comply with these requirements, the projects must have an “Approved by Fannie Mae” status designation in Fannie Mae’s Condo Project ManagerTM (see Section 5701.9(a) for additional information) for the Mortgages to be eligible for sale to Freddie Mac. Note: If the requirements for Established Condominium Projects in this Section 5701.5 are met, then the Seller is not required to comply with the requirements for any of the other project review types in Sections 5701.6 (New Condominium Project reviews), 5701.7 (Exempt from review) and 5701.9 (Reciprocal project reviews). 5701.5: Established Condominium Projects (Future effective date 01/04/27) Effective for Mortgages with Application Received Dates on or after January 4, 2027. This section contains: ■ Project completion requirements for Established Condominium Projects ■ Project budget requirements for Established Condominium Projects ■ Delinquent assessments for Established Condominium Projects ■ Requirements when a Seller relies on a project reserve study for Established Condominium Projects ■ Requirements when an Established Condominium Project contains Manufactured Homes To be eligible for the Established Condominium Projects review type, the Condominium Project must meet the definition of an Established Condominium Project. If the Condominium Project does not comply with the eligibility requirements for Condominium Projects with a Project Certified status Project Assessment Request (PAR) finding (see Section 5701.10), the Mortgage must comply with all of the following eligibility requirements in addition to the project review and eligibility requirements in Section 5701.2. Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-32 (a) Project completion requirements for Established Condominium Projects All units, Common Elements and Amenities must be complete. (b) Project budget requirements for Established Condominium Projects The project’s budget for the current fiscal year must comply with the following: 1. Be consistent with the nature of the project 2. Appropriate assessments must be established to manage the project 3. There must be appropriate allocations for line items pertinent to the type and status of the Condominium Project 4. There must be adequate funding for insurance deductible amounts 5. At least 15% of the budget must provide funding for replacement reserves for capital expenditures and deferred maintenance based on the project’s age, estimated remaining life and replacement cost of major Common Elements Calculation of replacement reserve percentage Formula Exclusions The replacement reserve percentage is determined by dividing: (i) the annual budgeted replacement reserve allocation by (ii) the Homeowners Association’s (HOA’s) annual budgeted assessment income (including regular common expense fees) The calculation may exclude: i. Special assessment income ii. Income allocated to or in reserve accounts iii. Incidental income not relied upon for maintenance operations or capital improvements; and iv. Amounts collected from unit owners (but usually paid individually by them) for items or utilities such as internet access 6. A Seller may rely on a reserve study instead of the project budget providing a replacement reserve of at least 15%, provided the conditions in section (d) below are met 7. An HOA must not receive more than 10% of its budgeted income from the rental or leasing of commercial parking facilities Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-33 (c) Delinquent assessments for Established Condominium Projects (i) HOA assessments No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of their HOA assessments. (ii) Special assessments No more than 15% of the total number of units in a project are 60 or more days delinquent in the payment of each special assessment. (d) Requirements when a Seller relies on a project reserve study for Established Condominium Projects The reserve study must comply with the following requirements: 1. The reserve study generally must include: ■ An inventory of major components of the project; ■ Financial analysis and evaluation of current reserve fund adequacy; and ■ Proposed annual reserve funding plan 2. A reserve study’s financial analysis must validate that the project has appropriately allocated the recommended reserve funds to provide the Condominium Project with sufficient financial protection comparable to Freddie Mac’s standard budget requirements for replacement reserves 3. The reserve study’s annual reserve funding plan, which details total costs identified for replacement components, must meet or exceed the study’s recommendation and conclusion 4. The most current reserve study (or update) must be dated within 36 months of the Seller’s determination that a Condominium Project is eligible (see Section 5701.2(a)(3)) 5. The reserve study must be prepared by an independent expert skilled in performing such studies (such as a reserve study professional, a construction engineer, a certified public accountant who specializes in reserve studies or any professional with demonstrated experience and knowledge in completing reserve studies) 6. The reserve study must meet or exceed requirements set forth in any applicable state statutes Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701 As of 05/06/26 Page 5701-34 7. The reserve study must comment favorably on the project’s age, estimated remaining life, structural integrity and the replacement of major components If the Seller relies on a reserve study that meets the requirements of this section, the project’s budget must contain the highest recommended reserve allocation amount in the study to support the costs identified in the study. Reserve studies that establish a reserve funding goal that allows the reserve cash balance to approach but never fall below zero during the cash flow projection, referred to as baseline funding method, must not be used to waive the 15% reserve requirement. The Seller must obtain and retain in the Mortgage file a copy of the reserve study. The Seller must also perform an analysis of the study and retain this analysis in the Mortgage file. (e) Requirements when an Established Condominium Project contains Manufactured Homes To be eligible: 1. The Mortgage must be secured by a Detached Condominium Unit 2. The subject Manufactured Home must not be a single-wide Manufactured Home 3. The subject Manufactured Home must meet the requirements in Chapter 5703 4. Although Section 5701.3(a) states otherwise, the Condominium Project’s unit owners must only have an undivided ownership interest in the land on which the project is located 5. The Condominium Project must not have campgrounds or other facilities for transient or mobile units For Condominium Unit Mortgages secured by Condominium Units located in Condominium Projects that contain Manufactured Homes that do not comply with these requirements, the projects must have an “Approved by Fannie Mae” status designation in Fannie Mae’s Condo Project ManagerTM (see Section 5701.9(a) for additional information) for the Mortgages to be eligible for sale to Freddie Mac. Note: If the requirements for Established Condominium Projects in this Section 5701.5 are met, then the Seller is not required to comply with the requirements for any of the other project review types in Sections 5701.6 (New Condominium Project reviews), 5701.7 (Exempt from review) and 5701.9 (Reciprocal project reviews).

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