Jennifer Fivelsdal recently wrote a blog about the advantages and disadvantages of a shared driveway. After reading her blog I remembered a loan that I tried to do about two years ago on a property with a private road.
There were 8 houses on this private road, and there was no maintenance agreement in place. The Borrower was doing a Fannie Mae Conventional Mortgage and putting 20% down. Fannie Mae guidelines require a maintenance agreement for private roads, which meant that one of the parties in the transaction Seller/Buyer needed to have their Attorney draw one up a maintenance agreement, and have all the homeowners on the road agree to it. All the neighbors on the road agreed to sign the road maintenance agreement except one. After many attempt of trying to convince this homeowner that it was in his best interest to have a maintenance agreement in place the deal fell apart.
Oddly enough if this had been an FHA Mortgage the loan could have been done, because FHA no longer has a requirement for maintenance agreements on private roads. But if the Borrower had changed from a Fannie Mae Conventional Mortgage to a FHA Mortgage, the Borrower would of had to pay Mortgage Insurance (MI) for the first 5 years, and it would have added a significant amount to their monthly payment. The only way for a Borrower to avoid paying MI, is to do a 15 year or less mortgage, and put down 22% or more.
A Fannie Mae Private Road Maintenance Agreement must be recorded on the land records for the municipality that the property is located in, and must contain the following:
- Each homeowners responsibility for the road and monetary share of repairs and maintenance.
- A remedy in case of default, or failure to comply by one of the homeowners
- The effective term of the agreement. In most agreements the term is perpetual and binding on all future owners.
NOTE: If the property is in a State that has statutory provisions that state what the responsibilities of what each property owner is responsible for in maintaining and repairing the private road/street, a separate maintenance road agreement is required.
NOTE: The same guideline for a Fannie Mae Private Road Maintenance Agreement, also applies to Shared Driveways.
*******************************************************************************
Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
Comments(14)