I am frequently asked whether lenders will finance a condo that is in pending litigation.
Fannie Mae (Conventional) does make an exception for minor litigation. Projects for which the lender determines that pending litigation involves minor matters are not considered ineligible projects, provided the lender concludes that the pending litigation has no impact on the safety, structural soundness, habitability, or functional use of the project.
The following is a definition of “minor” pending litigation.
Non monetary litigation involving neighbor disputes or rights to quiet enjoyment
- Litigation for which the claimed amount is known, the insurance carrier has agreed to provide the amount covered by the association’s insurance
- The home owner’s association is named as the plaintiff in a foreclosure action for past due home owner’s dues.
The lender will need to document the amount that the HOA is liable if it does not win the law suit.
If you have a scenario that you want to run by me then please let me know.
Loan Officer, NMLS #487461