When securing financing for a condo, understanding lender requirements is crucial, especially when it comes to fidelity (crime) insurance. Fannie Mae and Freddie Mac have slightly different rules, and knowing these differences can help streamline your loan approval process.

Fannie Mae’s Fidelity Insurance Rules

– Required for condos with 20+ units – Developments with fewer than 20 units are exempt.

– No exceptions for reduced coverage – Fannie Mae will not accept lower coverage limits under any circumstances.

Freddie Mac’s Fidelity Insurance Rules

– Required for ALL condo developments – Unlike Fannie, Freddie mandates fidelity insurance regardless of the number of units.

– Reduced coverage may be allowed – If the HOA meets at least one of the following conditions:

• Separate accounts – Operating budget and reserve funds are kept in distinct accounts.
• Direct bank reporting – Monthly statements are sent directly to the HOA (not just management).
• Dual authorization – At least two board members must approve any fund withdrawals.

Why This is Important for Buyers & Lenders

• Fannie Mae loans may be simpler for smaller condos (under 20 units) since fidelity insurance isn’t required.
• Freddie Mac loans could offer flexibility for HOAs that meet their reduced coverage criteria.
• Non-compliance could delay or derail financing, so confirming a condo’s insurance setup early is key.

We Can Help Navigating Condo Financing

Whether you’re a buyer, realtor, or HOA manager, understanding these requirements can prevent last-minute hurdles. Contact our team for expert guidance on condo project approvals and lender requirements.