June 25, 2008 / Law Alert

Greater Burden On Lenders Writing Condominium Loans

The subprime mortgage situation has caused many lenders to rethink the allocation of cost and risk involved in mortgage lending. Fannie Mae and Freddie Mac recently altered their positions on condominium lending, shifting the burden of evaluating the legal formation of condominium and related developments onto originating lenders. Any lender wanting to sell one or more of these loans, therefore, should engage a qualified attorney prior to writing those loans to review the formation and legal status of the development, as that lender will be required to make extensive representations and warranties to Freddie Mac and Fannie Mae.