How to Answer Lender Affidavits and Questionnaires

Published on: September 1, 2009

Several years ago a property manager and board of trustees were sued by a unit owner claiming that the information provided on the so-called Fannie Mae Affidavit/Lender Questionnaire was incorrect. This case has been making its way through the legal system since that time. The Appeals Court just ruled that in fact the Association and manager were responsible for the information on the questionnaire. The Court ruled that the information regarding a special assessment was incorrect and the manager and association were liable for negligent misrepresentation. The unit owner claimed that he bought the unit relying on the statement that there were no special assessments pending.

At the time the questionnaire was filled out there was no special assessment pending and the association had not voted on a special assessment. And, the association maintained the unit owner did not read the questionnaire nor did the owner rely upon the questionnaire when purchasing the unit. However, the Court decided the association was responsible for the unit owner purchasing the unit without knowing about the future $6,000.00 special assessment and that the unit owner should not be responsible to pay this special assessment.

Property managers agreed that a questionnaire needed to be completed to facilitate lending to condominium owners, however, manager and associations could not subject themselves to liability to make the loan process more efficient.

In early 2003, the CAI-NE attorneys’ committee responded to those concerns and drafted its own form of questionnaire that included language limiting liability for the information contained therein and specifically stating that a potential buyer may not rely upon the questionnaire.

At first, the new questionnaire met a lot of resistance from the lending community which was accustomed to having their own form filled out. Fortunately, associations and managers were willing to stand their ground on the issue, and refused to fill out the lender’s form; eventually, the lending community became aware of the condominium associations’ concerns and, after awhile, the questionnaire drafted by the attorneys’ committee was accepted by the lending community.

In addition, to expedite the acceptance of the original 2003 form, I forwarded the attorneys’ committee questionnaire to in-house counsel at Fannie Mae in Texas who advised that the new form was satisfactory to Fannie Mae. Although there were still occasional questions regarding the use of the attorney’s committee questionnaire, it has become the custom for most associations to use this form until recently.

With the 2007 and 2008 changes to Fannie Mae lending guidelines, associations and managers are being asked once again to complete lender affidavits and questionnaires that are often times much more comprehensive. In response, the attorney’s committee questionnaire has been updated and revised. Since the Appeals Court decision that the association and manager can be liable for negligence misrepresentation, it is even more important for associations and managers to continue to use the attorney’s committee questionnaire or a form like it to limit their liability.

In addition to the question of liability, discussions have also centered around why the questionnaire should be filled out without a legal requirement to do so, and the costs associated with completing the form. Throughout the closing process, other providers of information for the closing are paid a fee for that information, so why should association managers spend time and effort – and expose themselves to potential liability – without being paid for their time?

One last argument for using your own form is that you are much more certain that the information is accurate, and you will not longer be answering questions when you may not be certain of the answer.

[LENDER AFFIDAVIT LETTER] [LENDER QUESTIONNAIRE]