source:
  type: guide
  id: fnma-sel-b4-2.1-03
  authority: Fannie Mae Selling Guide B4-2.1-03 — Ineligible Projects
  description: Fannie Mae Selling Guide B4-2.1-03 — Ineligible Projects.
  coverage_tier: operative
obligations:
- id: fnma-sel-b4-2.1-03-full
  canonical_id: fnma-sel-b4-2.1-03-full
  section: Fannie Mae Selling Guide B4-2.1-03 — Ineligible Projects
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B4-2.1-03 — Ineligible Projects
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B4-2.1-03, Ineligible Projects (08/06/2025) Introduction This
      topic contains information on ineligible projects and related criteria, including:
      List of Ineligible Project Characteristics Projects that Operate as Hotels or
      Motels Projects Subject to Split Ownership Arrangements Projects that Contain
      Multi-Dwelling Unit Condos or Co-ops Projects with Property that is not Real
      Estate Projects that Operate as a Continuing Care Community or Facility Non-Incidental
      Business Arrangements Commercial Space and Mixed-Use Allocation Recreational
      Leases and Mandatory Memberships Live-Work Projects Litigation or Pre-litigation
      Activity Single-Entity Ownership Projects in Need of Critical Repairs Projects
      Terminating or Involved in Insolvency Proceedings List of Ineligible Project
      Characteristics Fannie Mae will not purchase or securitize mortgage loans that
      are secured by units in certain condo or co-op projects if those projects have
      characteristics that make the project ineligible. Such characteristics are described
      in the table below, with additional details provided in the sections that follow.
      All eligible projects must be created and remain in full compliance with state
      law and all other applicable laws and regulations of the jurisdiction in which
      the project is located. Note: Loans secured by units in projects with a status
      of "Unavailable" in Condo Project Manager (CPM) or on the DU Underwriting Findings
      report are ineligible for purchase by Fannie Mae. If a lender determines that
      a project does not meet all of Fannie Mae''s project eligibility requirements
      but believes that the project has merit and warrants additional consideration,
      the lender may request an exception (see B4-2.2-07, Projects with Special Considerations,
      for additional information. Ineligible Project Characteristics Condo Project
      Type Co-op Project Type Timeshare, fractional, or segmented ownership projects.
      ✔ ✔ Published May 6, 2026 636 Ineligible Project Characteristics Condo Project
      Type Co-op Project Type New projects where the seller is oﬀering sale or ﬁnancing
      structures in excess of Fannie Mae’s eligibility policies for individual mortgage
      loans. These excessive structures include, but are not limited to, builder/developer
      contributions, sales concessions, HOA assessments, or principal and interest
      payment abatements, and/or contributions not disclosed on the settlement statement.
      ✔ ✔ Any project that permits a priority lien for unpaid common expenses in excess
      of Fannie Mae’s priority lien limitations. (See B4-2.1-01, General Information
      on Project Standards for additional detail.) ✔ Limited or shared equity co-ops
      that have not been approved by Fannie Mae through the PERS process, as required.
      These are projects in which the co-op corporation places a limit on the amount
      of return that can be received when stock or shares are sold. ✔ A tax-sheltered
      syndicate’s leasing to a co-op or “leasing” co- ops – projects that involve
      the leasing of the land and the improvements to the co-op corporation, even
      if the co-op corporation owns part of the building. ✔ Co-op projects in which
      the developer or sponsor has an ownership interest or other rights in the project
      real estate or facilities other than the interest or rights it has in relation
      to unsold units. ✔ Projects that are managed and operated as a hotel or motel,
      even though the units are individually owned. (See Projects that Operate as
      Hotels or Motels below for additional detail.) ✔ ✔ Projects with covenants,
      conditions, and restrictions that split ownership of the property or curtail
      an individual borrower’s ability to utilize the property. (See Projects Subject
      to Split Ownership Arrangements below for additional detail.) ✔ ✔ Published
      May 6, 2026 637 Ineligible Project Characteristics Condo Project Type Co-op
      Project Type Multi-dwelling unit projects that permit an owner to hold title
      (or stock ownership and the accompanying occupancy rights) to more than one
      dwelling unit, with ownership of all of their owned units (or shares) evidenced
      by a single deed and ﬁnanced by a single mortgage (or share loan). (See Projects
      that Contain Multi- Dwelling Unit Condos or Co-ops below for additional detail.)
      ✔ ✔ Projects with property that is not real estate, such as houseboat projects.
      (See Projects with Property that is not Real Estate below for additional detail.)
      ✔ ✔ Any project that is owned or operated as a continuing care facility. (See
      Projects that Operate as a Continuing Care Community or Facility below for additional
      detail.) ✔ ✔ Projects with non-incidental business operations owned or operated
      by the HOA including, but not limited to, a restaurant, spa, or health club.
      (See Non-Incidental Business Arrangements below for additional detail and exceptions
      to this policy.) ✔ The total space that is used for nonresidential or commercial
      purposes may not exceed 35%. (See Commercial Space and Mixed-Use Allocation
      below for additional detail.) ✔ ✔ Projects with mandatory upfront or periodic
      membership fees for the use of recreational amenities, such as country club
      facilities and golf courses, owned by an outside party (including the developer
      or builder). Membership fees paid for the use of recreational amenities owned
      exclusively by the HOA or master association are acceptable. (See Recreational
      Leases and Mandatory Memberships below for additional information.) ✔ ✔ Projects
      that do not meet the requirements for live-work projects. (See Live-Work Projects
      below for additional detail.) ✔ ✔ Published May 6, 2026 638 Ineligible Project
      Characteristics Condo Project Type Co-op Project Type Projects in which the
      HOA or co-op corporation is named as a party to pending litigation, or for which
      the project sponsor or developer is named as a party to pending litigation that
      relates to the safety, structural soundness, habitability, or functional use
      of the project. (See Litigation or Pre-litigation Activity below for additional
      detail.) ✔ ✔ Projects in which a single entity (the same individual, investor
      group, partnership, project sponsor, or corporation) owns more than the following
      total number of units in the project: • projects with 5 to 20 units – 2 units
      • projects with 21 or more units – 20% (See Single-Entity Ownership below for
      additional detail.) ✔ ✔ Co-op projects with more than 20% of the stock or shares
      in the corporation and the related occupancy rights. (See Single-Entity Ownership
      below for additional detail.) ✔ Projects in need of critical repairs, including
      material deﬁciencies and signiﬁcant deferred maintenance. (See Projects in Need
      of Critical Repairs below for additional detail.) ✔ ✔ Projects that are terminating
      or involved in insolvency proceedings. (See Projects Terminating or Involved
      in Insolvency Proceedings below for additional detail.) ✔ ✔ Projects that Operate
      as Hotels or Motels A project may not be operated or managed as a hotel, motel,
      or similar commercial entity as evidenced by meeting one or more of the following
      criteria: The HOA is licensed as a hotel, motel, resort, or hospitality entity.
      The HOA or project’s legal documents restrict owners’ ability to occupy the
      unit during any part of the year. The HOA or project’s legal documents require
      owners to make their unit available for rental pooling (daily Published May
      6, 2026 639 or otherwise). The HOA or the project’s legal documents require
      unit owners to share proﬁts from the rental of units with the HOA, management
      company, or resort, or hotel rental company. In addition to the requirements
      above, any project with one or more of the following characteristics is ineligible.
      The project is primarily transient in nature; oﬀers hotel type services (including
      those oﬀered by or contracted through the HOA or management company) or characteristics
      such as registration services, rentals of units on a daily or short-term basis,
      daily cleaning services, central telephone service, central key systems and
      restrictions on interior decorating; is a conversion of a hotel (or a conversion
      of a similar type of transient housing) unless the project was a gut rehabilitation
      and the resulting condo units no longer have the characteristics of a hotel
      or similar type of transient housing building; is subject to voluntary rental-pooling,
      revenue, proﬁt or commission sharing agreements with the HOA or management company,
      or similar agreements that restrict the unit owner’s ability to occupy the unit
      such as blackout dates and occupancy limits to assure an inventory of units
      for rent on a frequent basis. This may include daily, weekly, monthly or seasonal
      restrictions; is professionally managed by a hotel or resort management company
      that also facilitates short term rentals for unit owners or projects with management
      companies that are licensed as a hotel, motel, resort, or hospitality entity;
      is deemed to be ineligible under Freddie Mac’s requirements because of condo
      hotel, resort, transient or short-term rental activity; has a legal or common
      name that contains hotel, motel, or resort, unless the use of hotel, motel,
      or resort is a reference to a historical use of the building and not reﬂective
      of its current use as a residential condo or co-op project; is marketed as a
      hotel, motel, resort or investment opportunity; or has obtained a hotel or resort
      rating for its hotel, motel, or resort operations through hotel ratings providers
      including, but not limited to, travel agencies, hotel booking websites, and
      internet search engines. The following criteria are examples of some common
      red ﬂags. The lender should perform additional due diligence of the project
      when any of these characteristics are present: 75% or more of the units are
      owned as investment and second home occupancy - especially when the loan transaction
      is not a principal residence transaction; units that do not contain full-sized
      kitchen appliances; advertisements for daily or short-term rental rates; franchise
      agreements; location of the project in a resort area; units that are less than
      400 square feet; amenities that are common in hotels or resorts including spa
      services, concierge services, rentals of recreational equipment or amenities,
      childcare services for short-term renters, scheduled social or entertainment
      activities for short-term renters, airport shuttles, ski lift shuttles or ski
      lift and trail passes, or other vacation amenities and packages; or interior
      doors that adjoin diﬀerent units. Projects Subject to Split Ownership Arrangements
      Published May 6, 2026 640 Projects with covenants, conditions, and restrictions
      that split ownership of the property or curtail an individual borrower’s ability
      to utilize the property are not eligible for delivery to Fannie Mae. These types
      of properties include, but are not limited to, the following: “common interest”
      apartments or community apartment projects that are projects or buildings owned
      by several owners as tenants-in-common or by an association in which individuals
      have an undivided interest in a residential apartment building and land, and
      have the right of exclusive occupancy of a speciﬁc apartment in the building;
      projects that restrict the owner’s ability to occupy the unit, even if the project
      is not being operated as a motel or hotel; and projects with mandatory rental
      pooling agreements that require unit owners to either rent their units or give
      a management ﬁrm control over the occupancy of the units. These are formal agreements
      between the developer, association, and/or the individual unit owners that obligate
      the unit owner to rent the property on a seasonal, monthly, weekly, or daily
      basis. In many cases, the agreements include blackout dates, continuous occupancy
      limitations, and other such use restrictions. In return, the unit owner receives
      a share of the revenue generated from the rental of the unit. Projects that
      Contain Multi-Dwelling Unit Condos or Co-ops Projects that contain multi-dwelling
      units are not permitted. These projects allow an owner to hold title (or share
      ownership and the accompanying occupancy rights) to a single legal unit that
      is sub-divided into multiple residential dwellings within the single legal unit,
      with ownership of the unit (or shares) evidenced by a single deed and ﬁnanced
      by a single mortgage (or share loan). The sub-divided units are not separate
      legal units. This restriction applies regardless if the unit owner maintains
      one or more of the sub-divided units as rental units or uses one or more of
      the sub-divided units as accessory or lock-out units. This provision does not
      apply to condo or co-op projects that allow an individual to buy two or more
      individual legal units with the intent of structurally and legally combining
      the units for occupancy as a single-unit dwelling. Mortgages secured by units
      in these types of projects are eligible for purchase and securitization by Fannie
      Mae provided all of the following requirements are met: The unit securing the
      mortgage represents a single legal unit under a single deed. Any construction
      or renovation to structurally combine units has no material impact on the structural
      or mechanical integrity of the project’s buildings or the subject property unit.
      The individual units must be fully described in the legal description in the
      mortgage and under a single deed. The project’s legal documents must have been
      amended to reclassify the combined units as a single unit in the project. All
      structural renovation to physically combine the units must be completed. A condo
      or co-op unit with an accessory unit may be eligible on a case-by-case basis
      with a Fannie Mae PERS Project Approval or a loan-level project eligibility
      waiver. See B4-2.2-07, Projects with Special Considerations, for additional
      information on submitting an exception request. Projects with Property that
      is not Real Estate Fannie Mae acquires mortgage loans secured by real estate.
      Houseboats, boat slips, cabanas, timeshares, and Published May 6, 2026 641 other
      forms of property that are not real estate are not eligible for delivery to
      Fannie Mae. The marketability and value of individual units in a project may
      be adversely impacted by the inclusion of non-real estate property such as houseboats,
      timeshares, and other forms and structures that are not real estate. As such,
      projects containing these other non-real estate forms of property are not eligible.
      Boat slips, cabanas, and other amenities are permitted when owned in common
      by the unit owners as part of the HOA. Projects that Operate as a Continuing
      Care Community or Facility Mortgages secured by units in a project that operates,
      either wholly or partially, as a continuing care community are ineligible for
      delivery to Fannie Mae. These communities or facilities are residential projects
      designed to meet specialized health and housing needs and typically require
      residents to enter into a lifetime contract with the facility to meet all future
      health, housing, or care needs. These communities may also be known by other
      names such as life-care facilities. Projects that make continuing care services
      available to residents are eligible only if the continuing care facilities or
      services are not owned or operated by the HOA and residential unit owners are
      not obligated to purchase or utilize the services through a mandatory membership,
      contract, or other arrangement. Continuing care communities are not the same
      as age-restricted projects. Age-restricted projects that restrict the age of
      residents but do not require residents to enter into a long-term or lifetime
      contract for healthcare and housing as the residents age are eligible. Non-Incidental
      Business Arrangements A condo project is ineligible if the HOA is receiving
      more than 10% of its budgeted income from non-incidental business arrangements
      related to the active ownership and/or operation of amenities or services available
      to unit owners and the general public. This includes, but is not limited to,
      businesses such as a restaurant or other food- and beverage-related services,
      health clubs, and spa services. Non-incidental income from the following sources
      is permitted provided the income does not exceed 15% of the project’s budgeted
      income: income from the use of recreational amenities or services owned by the
      HOA for the exclusive use by unit owners in the project or leased to another
      project according to a shared amenities agreement (as noted below), or income
      from the leasing of units in the project acquired by the HOA through foreclosure.
      The single-entity ownership limits (described above) will apply to the number
      of units owned and rented by the HOA. Commercial Space and Mixed-Use Allocation
      Fannie Mae requires that no more than 35% of a condo or co-op project or 35%
      of the building in which the project is located be commercial space or allocated
      to mixed-use. This includes commercial space that is above and below grade.
      Note that projects located in Special Flood Hazard Areas with commercial space
      greater than Published May 6, 2026 642 25% of the project’s square footage,
      including any commercial parking facilities, may need supplemental or private
      ﬂood insurance policies to meet Fannie Mae’s requirements for ﬂood insurance.
      Coverage under the National Flood Insurance Program may provide inadequate coverage
      for projects with commercial space in excess of 25%. See B7-3-06, Flood Insurance
      Requirements for All Property Types for additional information. Any commercial
      space in the project or in the building in which the residential project is
      located must be compatible with the overall residential nature of the project.
      Note: Rental apartments and hotels located within the project must be classiﬁed
      as commercial space even though these may be considered “residential” in nature.
      Commercial parking facilities can be excluded from the commercial space calculation.
      Calculation of Commercial Space. Commercial space allocation is calculated by
      dividing the total non- residential square footage by the total square footage
      of the project or building. Lenders are responsible for determining the total
      square footage of the project, the square footage of the non-residential space,
      and the residential space square footage. This calculation includes the total
      square footage of commercial space even if the residential and commercial owners
      are represented by separate associations. Non-residential square footage includes:
      retail and commercial space, and space that is non-residential in nature and
      owned by a private individual or entity outside of the HOA structure. Examples
      include, but are not limited to: rental apartments, hotels, restaurants, and
      private membership-based ﬁtness facilities. Non-residential square footage excludes
      amenities that are: residential in nature; designated for the exclusive use
      of the residential unit owners (such as, but not limited to, a ﬁtness facility,
      pool, community room, and laundry facility); and owned by the unit owners or
      the HOA. The following table shows which commercial or mixed-use space must
      be included in the calculation of the percentage of commercial space. If the
      commercial or mixed-use space is… Then its square footage is included in the
      calculation of commercial space percentage owned, controlled, or operated by
      the subject property’s HOA that is unrelated to the project-speciﬁc amenities
      oﬀered for the exclusive use and enjoyment by the HOA members Yes Published
      May 6, 2026 643 If the commercial or mixed-use space is… Then its square footage
      is included in the calculation of commercial space percentage owned by the subject
      property’s HOA but controlled or operated by a separate private entity Example:
      Oﬃce space owned by the HOA but leased to a private business. Yes owned and
      controlled by a project HOA other than the subject property’s HOA that shares
      the same master HOA with the subject property’s HOA AND the commercial space
      is co-located in the project’s building(s) that contain(s) the residential units
      Yes owned, controlled, or operated by a private entity that is co- located in
      the building(s) that contain(s) the project’s residential units Example: • ﬂoors
      1 to 4 consist of hotel and retail, • ﬂoors 5 to 7 consist of privately-owned
      and -managed rental apartments, and • the remaining ﬂoors consist of the condo
      project units. Yes owned, controlled, or operated by a private entity that is
      NOT co- located in the building(s) or common elements as declared in the project
      legal documents that contain(s) the project’s residential units No owned and
      controlled by a project HOA other than the subject property’s HOA that shares
      the same master HOA with the subject property’s HOA BUT the commercial space
      is located in a building that is separate from the building(s) containing the
      project’s residential units No Recreational Leases and Mandatory Memberships
      Loans securing units in condo and co-op projects with mandatory memberships
      that require the HOA or co-op members to pay dues to a third-party organization
      (such as a golf course or other recreational facility) are ineligible for sale
      to Fannie Mae. The project must be the sole owner of its amenities, though certain
      exceptions will be allowed when there is a shared amenities agreement between
      HOAs or co-op projects. Projects subject to recreational leases are also not
      eligible. A recreational lease is a long-term lease between Published May 6,
      2026 644 the HOA and a third party for access to certain recreational facilities
      for a speciﬁed time period and payment. In these scenarios, the owner of the
      facilities is often the project’s developer or has some ﬁnancial relationship
      to the developer and the leases often provide ongoing proﬁt to this party for
      the duration of the lease. The lease may permit the owner of the facilities
      to lease the amenities to other parties in addition to the HOA or co-op. The
      HOA or co-op may have certain ﬁnancial, insurance, and other legal obligations
      under the lease that may be burdensome over time. These leases may or may not
      provide the project long-term access to the amenities beyond the initial lease
      term. When an HOA is part of a master association, the lender is required to
      evaluate whether the subject property’s HOA members are required to participate
      in a mandatory membership that is managed through the master association. Additionally,
      the master association may not be subject to recreational leases as described
      above. Lenders are encouraged to review the project’s legal documents, sales
      contract, and budget to identify mandatory memberships and recreational leases.
      Some red ﬂags that a project may require a mandatory membership, or be a party
      to a recreational lease, is that the amenities may have some of the following
      characteristics: the amenities have a diﬀerent name from the residential project
      and may be recognized as a diﬀerent legal entity from the HOA, owners are required
      to pay large up-front fees to become a member or have access to the amenities,
      owners are required to pay monthly or periodic dues to the entity that owns
      or operates the amenities (these dues may be paid directly to the owner or operator
      or they may be paid to the HOA and passed through to the owner or operator),
      the general public may be able to purchase memberships or access passes for
      the use of the amenities, the amenities can be leased or rented to the public
      for events not hosted by the HOA or its members, or HOA members may be subject
      to block-out dates or other use restrictions. Live-Work Projects Live-work projects
      are projects that permit individual residential unit owners to operate and run
      a small business from their residential unit. Units in projects that permit
      live-work arrangements are eligible for sale to Fannie Mae provided the project
      complies with all applicable local zoning, program, or statutory requirements
      for live- work projects and the nature of the project is primarily residential.
      Litigation or Pre-litigation Activity Projects in which the HOA or co-op corporation
      is named as a party to pending litigation, or for which the project sponsor
      or developer is named as a party to pending litigation that relates to the safety,
      structural soundness, habitability, or functional use of the project are ineligible
      for sale to Fannie Mae. If a lender discovers that a project is engaging in
      pre-litigation activities (such as, but not limited to, arbitration or mediation)
      that are reasonably expected to proceed to formal litigation; the lender must
      apply Fannie Mae’s litigation policies. Whether the legal action is resolved
      through arbitration, mediation, or it proceeds to litigation, there is risk
      that the project is exposed to material ﬁnancial hardship related to the matters
      addressed in the complaint. If the lender determines that pending litigation
      involves minor matters with no impact on the safety, structural soundness, habitability,
      or functional use of the project, the project is eligible provided the litigation
      meets one Published May 6, 2026 645 or more of the following: non-monetary litigation
      including, but not limited to neighbor disputes or rights of quiet enjoyment;
      litigation for which the insurance carrier has agreed to provide the defense,
      and the amount is covered by the HOA''s or co-op corporation''s insurance; the
      HOA or co-op corporation is the plaintiﬀ in the litigation and upon investigation
      and analysis the lender has reasonably determined the matter is minor and will
      result in an insigniﬁcant impact to the ﬁnancial stability of the project; the
      reasonably anticipated or known damages and legal expenses are not expected
      to exceed 10% of the project’s funded reserves; the HOA or co-op corporation
      is seeking recovery of funds for issues that have already been remediated, repaired,
      or replaced and there is no anticipated material adverse impact to the HOA or
      co-op corporation if funds are not recovered; litigation concerning localized
      damage to a unit in the project that does not impact the overall safety, structural
      soundness, habitability, or functional use of the project; or the HOA or co-op
      corporation is named as the plaintiﬀ in a foreclosure action, or as a plaintiﬀ
      in an action for past due HOA or co-op assessments. Litigation that involves
      personal injury or death does not meet Fannie Mae’s criteria for minor litigation
      unless the claim amount is reasonably anticipated or known, the insurance carrier
      has agreed to provide the defense, and the reasonably anticipated or known damages
      are covered by the HOA’s or co-op corporation’s insurance. Construction defect
      litigation in which the HOA or co-op corporation is the plaintiﬀ are not considered
      a minor matter unless the HOA or co-op corporation is seeking recovery of funds
      for issues that have already been remediated, repaired, or replaced. In addition,
      there is no anticipated material adverse impact to the HOA or co- op if the
      funds are not recovered. The lender must obtain documentation to support its
      analysis that the litigation meets Fannie Mae’s criteria for minor litigation
      as described above. Single-Entity Ownership A project meets the deﬁnition of
      single-entity ownership when a single entity (the same individual, investor
      group, partnership, project sponsor, or corporation) owns more than the following
      total number of units in the project: projects with 5 to 20 units - 2 units
      projects with 21 or more units - 20% Units currently subject to any rental or
      lease arrangement must be included in the calculation. This includes lease arrangements
      containing provisions for the future purchase of units such as lease-purchase
      and rent-to- own arrangements. The following may be excluded from the single-entity
      ownership calculation: units that are owned by the project sponsor or developer
      and are vacant and being actively marketed for sale; or units that are controlled
      or owned by a non-proﬁt entity for the purpose of providing aﬀordable housing,
      Published May 6, 2026 646 units held in aﬀordable housing programs (including
      units subject to non-eviction rent regulation codes), or units held by higher-education
      institutions for a workforce housing program. project sponsor may own more than
      20% of the stock or shares in the corporation and the related occupany rights
      provided that any such stock or share ownership above the 20% limitation pertains
      to units that are subject to statutory rent regulations that limit the sponsor''s
      ability to sell their ownership interest in such shares or stocks. The lender
      must obtain documentation to validate the stock or share is subject to such
      regulations. The single-entity ownership requirement may be waived when the
      transaction is a purchase transaction that will result in a reduction of the
      single-entity ownership concentration. In such instances, the following requirements
      must be met: units owned by the single entity represent no more than 49% of
      the units; evidence is required that the single entity is marketing units for
      sale to further reduce single-entity ownership, with the goal of reducing the
      concentration to 20% or less of the project units; the single entity is current
      on all HOA assessments; and there are no pending or active special assessments
      in the project. Projects in Need of Critical Repairs Projects in need of critical
      repairs are those needing repairs or replacements that signiﬁcantly impact the
      safety, soundness, structural integrity or habitability of the project''s building(s),
      or the ﬁnancial viability or marketability of the project. Critical repairs
      include conditions such as: 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); advanced physical deterioration; any project
      that failed to pass state, county, or other jurisdictional mandatory inspections
      or certiﬁcations speciﬁc to structural safety, soundness, 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 load-bearing
      structures. If damage or deferred maintenance is isolated to one or a few units
      and does not aﬀect the overall safety, soundness, structural integrity, or habitability
      of the project, then these requirements do not apply. Routine repairs are not
      considered to be critical and include work that is: preventative in nature or
      part of normal capital replacements (for example, 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.
      A project with an evacuation order due to an unsafe condition, either for a
      partial or total evacuation of the project''s building(s), is ineligible until
      the unsafe condition has been remediated and the building(s) is deemed safe
      for occupancy. Published May 6, 2026 647 Special Assessments Special assessments
      may be current or planned. Lenders must obtain and review the following information
      for each special assessment to determine if it addresses a critical repair:
      what is the purpose of the special assessment, when was the special assessment
      approved and is it planned (approved by the unit owners, but not yet initiated
      by the board) or already being executed, what was the original amount of the
      special assessment and the remaining amount to be collected, and when is the
      expected date the special assessment will be paid in full. If the special assessment
      is associated with a critical repair and the issue is not remediated, the project
      is ineligible. Inspection Reports If a structural and/or mechanical inspection
      was completed within 3 years of the lender''s project review date, the lender
      must obtain and review the inspection report. The report cannot indicate that
      any critical repairs are needed, no evacuation orders are in eﬀect, and no regulatory
      actions are required. If the inspection report indicates there are unaddressed
      critical repairs, the project is ineligible until the required repairs have
      been completed and documented accordingly. The lender must review an engineer''s
      report or substantially similar document to determine if the repairs completed
      have resolved the safety, soundness, structural integrity, or habitability concerns
      of the project. Documentation Lenders may need to review a combination of documents
      to determine if a project meets Fannie Mae''s physical condition requirements.
      Lenders are responsible for determining which documents are needed to ensure
      compliance with the requirements of this Guide. Some examples of this documentation
      include, but are not limited to: HOA board meeting minutes, engineer report(s),
      structural and/or mechanical inspection reports, reserve studies, a list of
      necessary repairs provided by the HOA or the project''s management company,
      a list of special assessments provided by the HOA or the project''s management
      company, and other substantially similar documentation. Projects Terminating
      or Involved in Insolvency Proceedings A project must not be the subject of an
      action that would cause the project to cease to exist, including termination,
      deconversion, or dissolution of the project''s legal structure. In addition,
      a project must not be the subject of a voluntary or involuntary bankruptcy,
      insolvency, liquidation, or receivership proceeding, or any substantially similar
      action under state or federal law. This includes any project that has voted
      or is in the process of voting on any of the actions or proceedings described
      above. Recent Related Announcements Published May 6, 2026 648 The table below
      provides references to recently issued Announcements that are related to this
      topic. Announcements Issue Date Announcement SEL-2025-06 August 06, 2025 Announcement
      SEL-2025-05 July 02, 2025 Announcement SEL-2025-02 April 02, 2025 Announcement
      SEL-2024-07 November 06, 2024 Announcement SEL-2023-06 July 05, 2023 Announcement
      SEL-2020-06 October 07, 2020 Announcement SEL-2018-05 June 05, 2018 Announcement
      SEL-2018-01 January 30, 2018'
  judgment: false
