Yes, we follow FNMA guidelines in regard to leasehold properties.
Lease and Lender Requirements
The term of the leasehold estate must run for at least five years beyond the maturity date of the loan unless fee simple title will vest at an earlier date in the borrower.
The lease must provide that the leasehold can be assigned, transferred, mortgaged, and sublet an unlimited number of times either without restriction or on payment of a reasonable fee and delivery of reasonable documentation to the lessor. The lessor may not require a credit review or impose other qualifying criteria on any assignee, transferee, mortgagee, or sublessee.
The lease must provide for the borrower to retain voting rights in any homeowners’ association.
The lease must provide that in addition to the obligation to pay lease rents, the borrower will pay taxes, insurance, and homeowners’ association dues (if applicable), related to the land in addition to those he or she is paying on the improvements.
The lease must be valid, in good standing, and in full force and effect in all respects.
The lease must not include any default provisions that could give rise to forfeiture or termination of the lease, except for nonpayment of the lease rents.
The lease must include provisions to protect the mortgagee’s interests in the event of a property condemnation.
The lease must provide lenders with:
- the right to receive a minimum of 30 days’ notice of any default by the borrower, and
- the option to either cure the default or take over the borrower’s rights under the lease.