Key facts
- AD Mortgage has initiated a public policy initiative to engage with policymakers on housing finance.
- The company submitted a letter to FHFA Director Bill Pulte with recommendations on condominium financing.
- Concerns were raised about upcoming changes to Fannie Mae and Freddie Mac's condominium project eligibility requirements.
- Key changes include the elimination of the Limited Review process and an increase in reserve funding requirements from 10% to 15%.
- AD Mortgage believes these changes could reduce access to conventional financing for creditworthy borrowers.
- The company highlighted the disproportionate impact on Florida due to its high concentration of condominiums.
AD Mortgage has launched a public policy initiative, beginning with recommendations to the Federal Housing Finance Agency (FHFA) concerning condominium financing. In a July 1 letter to FHFA Director Bill Pulte, the company expressed concerns about upcoming changes to Fannie Mae and Freddie Mac's eligibility requirements for condominium projects. These changes include the sunsetting of the Limited Review process and an increase in reserve funding requirements from 10% to 15%.
Corey Chubner, AD Mortgage's senior vice president of government affairs and investor relationships, stated that the goal is to be a collaborative partner and share real-world lending data to show the implications of these changes. The company's proprietary data indicates that the Limited Review process has been crucial for conventional condominium loans, particularly in Florida, where over 750 such loans were originated since 2021 using this process, representing 53% of its conventional originations in the state.
AD Mortgage supports prudent project eligibility standards and shares the FHFA's objective of promoting sustainable homeownership. However, they are concerned that the combined effect of eliminating the Limited Review and increasing reserve funding could materially reduce access to Enterprise-backed financing for creditworthy borrowers. Approximately 30% of condominium projects manually reviewed by AD Mortgage had reserve funding below the new 15% threshold. The company is urging the FHFA to monitor the impact of these revised standards on borrower access to conventional financing and consider future adjustments if credit availability is reduced. Chubner noted that the letter has not yet received a response from Pulte.