Condominium units in a project where the Homeowners Association is involved in pre-litigation, mediation/arbitration, or formal litigation are considered “non-warrantable” by Fannie Mae (FNMA), a United States Government-Sponsored Entities (GSE’s) whose main goal is to provide liquidity to the nation’s mortgage finance system. Non-warrantable condominium loans are not eligible to be sold to Fannie Mae, therefore very few lenders offer programs for them.

To obtain financing on a non-warrantable condominium, one must use a lender that will not sell the loan to Fannie Mae but will either hold on to the loan in a portfolio or sell to an investor who will also hold on to the loan in a portfolio. The reason there are very few lenders for non-warrantable condominiums is that most lenders, including banks, mortgage banks, and wholesale lenders, want to have the option of being able to sell their loans in the secondary market.

Very few lenders offer condo litigation loans for non-warrantable condominiums, and those that do usually only offer Adjustable-Rate Mortgages (ARM’s). Conventional 30-year fixed mortgages are available, but on a limited basis, and through only a handful of originators. Loan guidelines and limits are set every year by Fannie Mae and are “county” specific.

The ultimate challenge in financing a condominium that is non-warrantable due to pre-litigation, mediation/arbitration, or formal litigation is finding a lender who has a condo litigation loan program. Many people prefer to use the banks and mortgage companies they have existing relationships with. The problem is these companies have little to no knowledge of how to process and fund the special type of loan needed.

Universal Capital Mortgage and Coast 2 Coast Funding Group are condominium specialists. As a direct lender, we can offer 30-year fixed condo litigation loans on condominiums in CA and OR that are involved in construction defect litigation. We are the preferred lenders to the top construction defect attorneys and consult for many of them as well. The loans are underwritten to the same guidelines that Fannie Mae uses and rates are only slightly higher.

For more details on a condo litigation loan, please fill out the scenario section on the right and someone will get back to you within 2 hours.