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B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements (05/03/2023)

Introduction
This topic contains information on loans with resale restrictions loan and borrower eligibility, collateral and delivery requirements including:

Eligibility Requirements

The following table describes the eligibility requirements for loans with resale restrictions.

Criteria Requirements
Loan Eligibility The loan must be a fixed-rate or ARM with an initial fixed period of five years or more and must comply with this Guide.
Borrower Eligibility

Borrowers must meet applicable criteria of the deed restriction.

If income limit requirements are imposed by both the resale restrictions and the terms of the mortgage, the most restrictive will apply.

Note: Age-related restrictions generally apply to the unit occupant and frequently require only one occupant to be aged 55 and over. In such a case, the borrower could be younger than 55 provided there is a unit occupant aged 55 and over. This occupant can be a non-borrower household member or a renter in the case of an investment property.
Property Type

One- and two-unit properties are eligible, including PUDs, condos, and co-ops.

Manufactured homes are not eligible unless they are located in a PERS-approved project.

Appraisal Requirements

In cases where the resale restrictions terminate automatically upon foreclosure (or the expiration of any applicable redemption period), or upon recordation of a deed-in-lieu of foreclosure, the appraisal should reflect the market value of the property without resale restrictions.

The lender must ensure that the borrower and appraiser are aware of the resale restrictions and should advise the appraiser that they must include the following statement in the appraisal report:

"This appraisal is made on the basis of a hypothetical condition that the property rights being appraised are without resale and other restrictions that are terminated automatically upon the latter of foreclosure or the expiration of any applicable redemption period, or upon recordation of a deed-in-lieu of foreclosure."

In cases where the resale restrictions survive foreclosure or a deed-in-lieu of foreclosure, the appraisal must reflect the impact the restrictions have on value and be supported by comparable sales with similar restrictions.

The appraisal report must note the existence of the resale restrictions and comment on any impact the resale restrictions have on the property's value and marketability.

Pricing and Delivery Considerations

Pricing

There are no specific LLPAs required for loans with resale restrictions. All other price adjustments that are otherwise applicable to the transaction will apply. For a list of current applicable LLPAs, see the  Loan-Level Price Adjustment (LLPA) Matrix .

Special Feature Codes

Lenders must report SFC 631 when delivering a loan secured by a property with resale restrictions that survive foreclosure or a deed-in-lieu of foreclosure.

No special feature code is required when delivering a loan secured by a property with resale restrictions that terminate automatically upon foreclosure (or the expiration of any applicable redemption period), or the recordation of a deed-in-lieu of foreclosure unless the loan is part of a shared equity transaction. See B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral RequirementsB5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements  for additional information.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2023-04 May 03, 2023

 

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