FHA has made several changes in recent years which have caused FHA Mortgages to not be the go-to Loan Product they use to be. As a result of this Fannie Mae Mortgages are a much more desirable choice these days. One of the issue which has become more common with the emphasis on Fannie Mae Mortgages over FHA, is the need for Private Road Or Driveway Maintenance Agreements on properties with private roads or shared driveways.
FHA Mortgages on properties with a private road or shard driveway, are not as much of a concern as it is with Conventional Mortgages. The reason is FHA does not have a requirement for properties on a private road or shared driveway to have a Private Road Or Driveway Maintenance Agreement, but Fannie Mae does. FHA only requires there be a Permanent Easement Agreement in place.
A few years ago I wrote a blog about a mortgage I was doing on a property which was on a Private Road with 7 other houses, and there was no maintenance agreement in place. The Borrower was doing a Fannie Mae Mortgage and putting 20% down. Since Fannie Mae guidelines require a "Maintenance Road Agreement" for private roads, a "Maintenance Road Agreement" needed to be drawn up, and all the homeowners on the road agree to sign it. All the neighbors on the road agreed to sign the "Maintenance Road Agreement" except one. After many attempt to convince this homeowner it was in his best interest to have a "Maintenance Road Agreement" in place the deal fell apart.
A similar situation also accrued to one of my Loan Originators. The property was on a road/driveway shared by three other houses, and one of the property owners would not sign the the private road/driveway agreement, as a result the loan did not Close.
If these loans had been FHA Mortgages the loans could have been approved and Closed. But if the Borrowers had changed from Fannie Mae Conventional Mortgages to FHA Mortgages, the Borrowers would of had to pay Mortgage Insurance (MIP) which would have been on the loan for at least 11 years, and added a significant amount to their monthly payment.
If a Private Road Or Driveway Maintenance Agreement is required such as in the case of Fannie Mae Mortgages, the Private Road Or Driveway 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 or driveway 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 which state what the responsibilities of each property owner is responsible for in maintaining and repairing the private road/street, a separate maintenance road agreement is NOT required.
Connecticut has many rural areas as do many other States, so it is important for both Listing and Selling Agents to be familiar with the guidelines, and be proactive in addressing this issue before the property even goes under contract. By doing so they can get a head start on obtaining a Private Road Or Driveway Maintenance Agreement if one does not exist.
Info about the author:
George Souto NMLS# 65149 is a Loan Originator 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, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org