November 2022

REPERCUSSIONS By Robert N. Roop, P.E., Lockatong Engineering Inc.

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R epercussions of the Champlain Towers collapse in June 2021 continue reverberating throughout the con dominium real estate community. Here in New Jersey, legislation has been proposed governing the inspection of certain types of construction, typical for mid- and high-rise con dominiums. It also addresses the need for reserve funding for structural inspection and implementation of corrective measures that any inspection might uncover. While the bill’s final version is unknown, and if it will pass is uncertain, associations should know it is on the horizon and plan accordingly. For more infor mation on this topic, please refer to Ed San George, MPA, PCAM, INTEGRA Management Corp., AAMC and Mitch Frumkin, PE, RS, Kipcon, Inc.’s September 2022 Community Trends ® Article, Structural Integrity Inspection, Reserve Funding [see link* below] Another repercussion has been in the primary and sec ondary mortgage market. The primary mortgage market is where borrowers can obtain loans from primary lenders like banks, credit unions, or even individual investors.

These direct lenders can hold the mortgage, service the loan, and profit from the collection of interest. Alternatively, the primary lender can sell the loan in the secondary mortgage market. It is in their interest to do so because it frees up capital to make more loans. The Federal National Mortgage Association (known as Fannie Mae or FNMA), among others, purchases many mortgages in the second ary market. They, in turn, package bundles of loans known as mortgage-backed securities for sale to other investors. For the secondary mortgage market to operate successful ly, there must be some way to access the quality of the pri mary loan. That’s where Fannie Mae, for example, comes in. Fannie Mae sets guidelines for loans qualifying for their purchase in the secondary market. For loans to condomini um buyers, one of the documents Fannie issued in March 2016 to establish the quality of a loan is Form 1076. It is also identified as Freddie Mac Form 476. Initially, its primary objective was to document the financial health and risk management of the association.

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* https://user-cainj.cld.bz/2022-CAI-NJ-September-LAC-Issue/28/

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